Our home construction company still buys nails in 15-pound boxes but now we use an average of 3495 boxes a year. Preparing an order and receiving a shipment of nails involves a cost of $0.55 per order. Annual carrying costs are $0.4 per bag What will be their total cost of ordering and carrying the nails?

Our home construction company still buys nails in 15-pound boxes but now we use an average of 3495 boxes a year. Preparing an order and receiving a shipment of nails involves a cost of $0.55 per order. Annual carrying costs are $0.4 per bag

What will be their total cost of ordering and carrying the nails?

Solution

Annual demand (D) = 3495 boxes

Ordering cost (S) = $0.55 per order

Carrying cost (H) = $0.4 per box

Economic order quantity (Q) = sqrt of