Jensen Autos, one of the largest car dealers in Eau Claire, sells about 700 vehicles a year. The cost of placing an order with their supplier is $1,100, and the inventory carrying costs are $120 for each car. Most of their sales are in late fall of each year. What is the number of cars per order?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to determine the optimal order size that minimizes the total inventory costs. The formula is: EOQ = sqrt((2DS)/H), where D is the demand (700 cars), S is the ordering cost ($1,100), and H is the holding cost per unit ($120). Plugging in these values gives EOQ = sqrt((2*700*1100)/120) = 113 cars.

Jensen Autos, One of the Largest Car Dealers in Eau