A retail outlet for calculators sells 700 calculators per year. It costs $2 to store one...

Question:

A retail outlet for calculators sells 700 calculators per year. It costs $2 to store one calculator for a year. To reorder, there is a fixed cost of $7, plus $2.15 for each calculator. How many times per year should the store order calculators, and in what lot size, in order to minimize inventory costs? The store should order........... calculators............times per year to minimize inventory costs.

Economic Order Model:

The Economic Order Model is a theory of inventory management that analyzes the optimal number of orders per year to meet demand. The model characterizes the optimal order quantity as one that minimizes the sum of ordering costs and holding costs.

Answer and Explanation:

The store should order {eq}\underline{70} {/eq} calculators {eq}\underline{10}{/eq} times per year to minimize inventory costs.

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Inventory Management Techniques

from Finance 101: Principles of Finance

Chapter 19 / Lesson 8
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