Question

Pam runs a​ mail-order business for gym equipment. Annual demand for TricoFlexers is 24,000.

The annual holding cost per unit is

​$3.25, and the cost to place an order is ​$67

a. What is the economic order​ quantity?

The EOQ is 995.

​(Enter your response rounded to the nearest whole​ number.)

b. Suppose demand for TricoFlexers​ doubles, to 48,000.

The EOQ for the new value of demand is

nothing.

​(Enter your response rounded to the nearest whole​ number.)

c. The manufacturer of TricoFlexers has agreed to offer Pam a price discount of ​$44 per unit $63 rather than $67 if she buys 1,000. Assuming that annual demand is still 24,000​,how many units should Pam order at a​ time?

Pam should order _____ units at a time. (Enter your response rounded to the nearest whole number)

Answer 1

Given:

• Demand (D) =24000 units/year
• Setup Cost (S) = $ 67
• Holding Cost (H)= $3.25 per unit per year

a) EOQ (Q) = ((2DS)/H)^0.5 = ((2*24000*67)/3.25)^0.5 = 994.75 = 995

b) If new Demand = 48000

EOQ (Q) = ((2DS)/H)^0.5 = ((2*48000*67)/3.25)^0.5 = 1406.79 = 1407

The EOQ of the new order increases as demand increases

       c) If Setup Cost (S) = $ 63

EOQ (Q) = ((2DS)/H)^0.5 = ((2*24000*63)/3.25)^0.5 = 964.60 = 965

There will be a slight decrease In the EOQ value