Explanation:
a. The computation of the economic order quantity is shown below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
[tex]= \sqrt{\frac{2\times \text{300}\times \text{\$500}}{\text{\$18}}}[/tex]
= 130 units
The carrying cost is
= $90 × 20%
= $18
b. Total annual cost is
[tex]= \sqrt{2\times300 \times\$500 \times\$18}[/tex]
= $2,323.79
c. The number of orders would be equal to
= Annual demand ÷ economic order quantity
= $300 ÷ 130 units
= 2.31 orders
d, The time between orders is
= 52 weeks ÷ 2.31 orders
= 22.51 weeks
