Decision analysis

Question

I need to solve this problem ?? An office supply company is attempting to determine the order quantity for laser printer toner cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of the item. What is the optimal ordering quantity?

Answer 1

Malak,

 

The optimal ordering quantity in a pinch is square root of 2KD/ic where K is order cost, D is demand, i is variable holding, and c is purchase cost. So here that's square root of 2*30*20000/.25/25=438.

 

Hope that helps,

Deanna