Scenario 9.5
Tom Bergman, owner and operator of the Earplug Superstore, is reviewing the costs associated with the store's best-selling hearing aid, the BZ15. The data available to Dr. Bergman concerning this device follow.
Demand = 25 units/week
Order cost = $3/order
Holding cost = $1.50/unit/year
The Earplug Superstore operates 52 weeks a year.
-Use the information in Scenario 9.5. If Tom orders at the economic order quantity, how many units does he order at a time?
A) less than or equal to 75 units
B) greater than 75 but less than or equal to 150 units
C) greater than 150 but less than or equal to 250 units
D) greater than 250 units

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) is the optimal quantity to order at a time to minimize the total inventory costs. The EOQ is given by the formula:EOQ = sqrt((2*D*O)/H)where:D = demand in units per yearO = order cost per orderH = holding cost per unit per yearIn this case, the demand is 25 units per week, or 1300 units per year (25 units/week * 52 weeks/year). The order cost is $3 per order, and the holding cost is $1.50 per unit per year. Plugging these values into the EOQ formula, we get:EOQ = sqrt((2*1300*$3)/$1.50) = 75 unitsTherefore, Tom should order 75 units at a time to minimize his total inventory costs.

Scenario 9.5 Tom Bergman, Owner and Operator of the Earplug Superstore, Is