A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity each time an order is placed,then ______orders are placed during the year.
A)13
B)15
C)20
D)25

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) is the optimal quantity of inventory to order at a time to minimize the total inventory costs. The EOQ is given by the formula:EOQ = √(2*D*O)/Hwhere:D = annual demandO = ordering costH = holding costIn this case, the annual demand is 62,500 boxes of napkins, the ordering cost is $200.00 per order, and the annual carrying cost is $1.00 per box. Substituting these values into the EOQ formula, we get:EOQ = √(2*62,500*$200.00)/$1.00) = 5,000 boxesSince the restaurant uses 62,500 boxes of napkins each year, and the EOQ is 5,000 boxes, the restaurant will need to place 62,500/5,000 = 12.5 orders during the year. Rounding up to the nearest whole number, the restaurant will need to place 13 orders during the year.

A Restaurant Currently Uses 62,500 Boxes of Napkins Each Year