Question

In: Operations Management

A mail-order house uses 15,890 boxes a year. Carrying costs are 60 cents per box a...

A mail-order house uses 15,890 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies.

Number of Boxes Price per Box
1,000 to 1,999 $1.25
2,000 to 4,999 1.20
5,000 to 9,999 1.15
10,000 or more 1.10


a. Determine the optimal order quantity. (Round your answer to the nearest whole number.)
  
Optimal order quantity              boxes

b. Determine the number of orders per year. (Round your answer to 2 decimal places.)
  
Number of order              per year

Solutions

Expert Solution

Economic Order Quantity refers to the number of unit the company should add to the inventory and the order is made to minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs.

keosha answered 4 months ago
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