Hammond Supplies expects sales of 224,222 units per year with carrying costs of $3.69 per unit and ordering cost of $4.53 per order. Assuming the level of inventory is stable, what is the optimal average number of units in inventory?

Round to the nearest whole number.

 

The optimal order quantity, also called the economic order quantity, is the most cost-effective amount of a product to purchase at a given time.

Economic Order Quantity = 2*Co*D/ Ch

Then the square root of the answer

• C_o is the cost of placing one order
• D is the annual demand
• C_h is the annual cost of holding one unit of inventory

Step-by-step explanation

• Annual Demand =224,222 units
• carrying costs =$3.69 per unit 
• Ordering cost= 4.53 per order

=2*4.53*224,222/3.69 

550528.81

Square root 550528.81

= 741.97628871

Nearest whole number

=742 Units