You have an annual demand of 494,000 units, inventory carrying costs of 25.8%, a unit cost of $127.22, and an ordering cost of $84.73. Calculate Q*.

Respuesta :

Answer:

The value of Q* is 1597.02.

Step-by-step explanation:

Given information:

Annual demand = 494,000 units

Inventory carrying costs = 25.8% = 0.258

Unit cost = $127.22

Ordering cost = $84.73

The formula for order quantity is

[tex]Q*=\sqrt{\dfrac{2DS}{H}}[/tex]

where, D is annual demand, S is setup ordering cost and H is holding or carrying cost.

[tex]Q*=\sqrt{\dfrac{2\times 494000\times 84.73}{0.258\times 127.22}}[/tex]

[tex]Q*=1597.0169549[/tex]

[tex]Q*\approx 1597.02[/tex]

Therefore, the value of Q* is 1597.02.