Answer:
1,549 units
Explanation:
a. The computation of the economic order quantity is shown below:
= [tex]\sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is 15,000 units
Ordering cost is $10 per unit
And, the carrying cost = $0.50 per unit × 25% = 0.125
= [tex]\sqrt{\frac{2\times \text{15,000}\times \text{\$10}}{\text{\$0.125}}}[/tex]
= 1,549 units
We considered all the things i.e annual demand, ordering cost and the carrying cost so that the correct quantity can come.
