Question

SNK Incorporated, a company that makes widgets, would like to reduce its inventory cost by determining the optimal number of widgets to obtain per order. The annual demand is 1,000 units; the setup or ordering cost is $10 per order; and the holding cost per unit per year is $.50. What is the optimal number of units per order

Answer 1

Answer:

The optimal number of units per order is 200 units

Explanation:

The computation of the optimal number of units per order is shown below:

Here we apply the economic order quantity formula

$EOQ = \sqrt{\frac{2DS}{H}\\\\= \sqrt{\frac{2\times1,000\times10}{0.50} }\\\\ = \sqrt{\frac{20,000}{0.50} }\\\\ = \sqrt{40,000}$

= 200 units

hence, the optimal number of units per order is 200 units and the same is to be considered