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a supermarket expects to sell 4000 boxes of sugar in a year. each box costs $2, and there is a fixed delivery charge of $20 per order. if it costs $1 to store a box for a year, what is the order size and how many times a year should the orders be placed to minimize inventory costs?

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abiolataiwo2015

If  it costs $1 to store a box for a year, the order size is 400 units and the number times a year should the orders be placed to minimize inventory costs is 10 times.

Economic order quantity (EOQ)

Economic order quantity:

Using this formula to determine the economic order quantity

EOQ = √[2 (setup costs)(demand rate)] / holding costs.

Let plug in the formula

EOQ =√(2× 20× 4000)/1

EOQ = √160,000

EOQ = 400 units

Number of orders:    

Number  of orders = Annual Demand / EOQ

Number of order = 4000/400

Number of order  = 10 times

Therefore the EOQ is 400 units and the number of orders is 10.

Learn more about Economic order quantity here: https://brainly.com/question/15737464

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