Annual demand for the notebook binders that Ted's Stationery Shop sells is 10,000 units. Ted operates his business on a 200-work-day year. The unit cost of a binder is $2, and the cost of placing an order with his supplier is $0.40. The cost of carrying a binder in stock for one year is 10 percent of its value.
a. What should the EOQ be?
b. How many orders are placed per year?
c. How many working days elapse between reorders?
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Flux square root of the $o.40 will be the cost for operating demand minus the demand needed in a 200 workday year. Multiply this by the full cost of a binder at 10 percent par value. Enter the bond relevance at a discounted work year to get 2(10,000)(200)/.2= 2,000,000 use this as a base board amount discount at its square root to find 1,414.21
To determine the EOQ (Economic Order Quantity), we can use the following formula:
EOQ = √((2 * D * S) / H)
Where:
D = Annual demand (10,000 units)
S = Cost per order ($0.40)
H = Holding cost per unit per year (10% of $2 = $0.20)
a. Calculating the EOQ:
EOQ = √((2 * 10,000 * 0.40) / 0.20)
EOQ = √((8,000) / 0.20)
EOQ = √(40,000)
EOQ ≈ 200
Therefore, the EOQ should be approximately 200 units.
b. To find the number of orders placed per year, we can divide the annual demand by the EOQ:
Number of orders = Annual demand / EOQ
Number of orders = 10,000 / 200
Number of orders = 50
So, 50 orders will be placed per year.
c. To determine the number of working days elapsed between reorders, we divide the number of workdays in a year by the number of orders:
Number of working days between reorders = Number of workdays in a year / Number of orders
Number of working days between reorders = 200 / 50
Number of working days between reorders = 4
Therefore, approximately every 4 working days, Ted should reorder notebook binders from his supplier.