Question

Question 1 (10 points) A company uses 1450 rolls of masking tape annually. It costs the company $15 to order and receive this product. The masking tape costs $3.42 per roll. The company uses a factor of 16% of the purchase price to determine the annual holding cost for this product. What is the Economic Order Quantity (EOQ)? 381.2 rolls 0 61 rolls 281.9 rolls 2.7 rolls 79,495 rolls

Answer 1

Annual Rolls requirement = 1450 Order Cost = 15 Holding cost = 3.42 #16%=0.5472 K o Q = Order cast 2 * Annual Demand Holding cost 2*1450*15 0.5 472 79495.6 (281.9 Rolls)

explanation

Economic Order quantity is also called optimum lot size which describes the number of units added to inventory with each order to minimize the ordering cost and holding cost .the optimum lot size is the quantity at which the total inventory costs are minimized (holding and ordering costs ). Economic order quantity helps in ordering the required materials and overcomes the shortages .