Our home construction company buys nails in 15-pound boxes. We use an average of 2104 boxes a year. The vendor that makes the nails can produce 43 boxes per day while our usage is 12 boxes per day. It costs $3.20 to place the typical order. Annual carrying costs are $0.45 per box. What will be our average number of boxes on hand if we order the EOQ bags in each order?
Expert Answer
Annual demand (D) = 2104 boxes
Ordering cost (S) = $3.20
Carrying cost (H) = $0.45
Economic order quantity (Q) = sqrt of (2DS / H)
= sqrt of
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