Answer:
The approximate economic order quantity is 110 units.
Explanation:
A = annual demand = 10,000 units per year
C = unit cost of pot = $1000
S = Ordering cost per order = $150
I = Annual carrying cost (%) = 25% of unit cost
H = Annual carrying cost ($) = 0.25*C
= 0.25*$1000
= $250 per unit per year
Optimal order quantity is obtain from the EOQ formula.
Economic Order Quantity (EOQ) is given as follows:
Q = \sqrt{\frac{2*A*S}{H}}
Q = \sqrt{\frac{2*10,000*150}{250}}
Q = \sqrt{\frac{3000000}{250}}
Q = \sqrt{12000} = 109.545
Q = 110 units per order
Therefore, The approximate economic order quantity is 110 units.
