Question

Question 26 3 point An large auto repair shop has been purchasing windshields for their cam at the rate of 250 windshields per order. The firm estimates that carrying (or holding) cost is $28 per year, and that ord about $253 per order. The current price of each windshield is $200. The assumptions of the basic EQ model apply. For what annual demand (D) is the current action optimal? units per order holding cost order cost product cost 250 units 528 per unit per year 3253 per order 5200 per unit Excel Access

Answer 1

Question: A large auto repair shop has been purchasing windshields for their cars at the rate of 250 windshields per order. The firm estimates that carrying cost is $28 per year, and that order cost is about $253 per order. The current price of each windshield is $200. The assumptions of the basic EOQ model apply. For what annual demand is their current action optimal.

Answer: Annual Demand (D) = 3458.50

Explanation:

Given that:

Annual Demand (D) = ?

Holding Cost (H) = 28

Ordering Cost (S) = 253

EOQ = 250

Now:

Economic Order Quantity is given by:

EOQ = Sqrt(2 x D x S / H)

Therefore:

250 = Sqrt(2 x D x 253 / 28)

Since we do not know the Annual Demand, we obtain the same from EOQ formula.

D = (250^2 x 28) / (2 x 253)

D = 3458.49802

D = 3458.50