Reference 14-2:
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.
-How many orders will the dealer need to place this year? Round your answer to the whole number.

Question

Reference 14-2: 
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.
-How many orders will the dealer need to place this year? Round your answer to the whole number.

Quizplus · Accepted Answer

To determine the number of orders, we need to divide the total number of cars sold in a year by the number of cars that can be ordered in each order. The number of cars sold by Jensen Autos in a year is 700. The cost of placing an order is $1,100, and the carrying cost per car is $120. Therefore, the Economic Order Quantity (EOQ) can be calculated as follows:

EOQ = sqrt[(2 x 700 x $1,100) / $120] = 5.5

Since the EOQ is not a whole number, we can round up to the nearest integer, which gives us the number of orders needed in a year. Therefore, Jensen Autos will need to place 6 orders in the year.

Reference 14-2: Jensen Autos, One of the Largest Car Dealers in Eau