Assume uniform annual demand for an item is 50,000 units, order costs are $10.00, and the annual cost of holding one unit in inventory is 5% of the $20.00 acquisition cost. The optimal order quantity is

A. 100.00 units.

B. 224.00 units.

C. 1,000 units.

D. 448.00 units

Question

contestada

Respuesta :

aristeus aristeus · Answer 1 · 2019-12-26T10:53:47+01:00

Answer:

Optimal order quantity will be 1000 units

So option (c) will be correct answer

Explanation:

We have given annual demand for an item D = 5000 units

Order cost S = $10

Annual cost of holding H = 5 % of $20 which is equal to $1

So holding cost H = 1

We have to find the optimal order quantity

Optimal order quantity is given by

Optimal order quantity [tex]=\sqrt{\frac{2DS}{H}}=\sqrt{\frac{2\times 50000\times 10}{1}}=1000units[/tex]

So option (C) will be correct option