A firm has the following gross requirements for Item F.If ordering costs are $60 per order and carrying costs are $0.50 per period. If the periodic order quantity lot sizing rule is used,the number of period's worth of requirements is
A)0.
B)1.
C)2.
D)3.

Question

A firm has the following gross requirements for Item F.If ordering costs are $60 per order and carrying costs are $0.50 per period.  If the periodic order quantity lot sizing rule is used,the number of period's worth of requirements is
A)0. 
B)1. 
C)2. 
D)3.

Quizplus · Accepted Answer

To determine the number of period's worth of requirements for the periodic order quantity lot sizing rule, we need to use the following formula:
N = sqrt((2DS)/H)
where N is the number of periods worth of requirements, D is the annual demand, S is the ordering cost, and H is the carrying cost per unit per period.

Using the given information, we have:
D = gross requirements = 2400
S = ordering cost = $60 per order
H = carrying cost = $0.50 per period
T = length of period = 1 year

Plugging these values into the formula, we get:
N = sqrt((2*2400*60)/0.5) = 55.03

Since we need to round up to the next whole number of periods, the answer is 2. Therefore, the best choice is C.

A Firm Has the Following Gross Requirements for Item F