A retail outlet for Boxo-witz Calculators sells 720 calculators per year. It costs $2 to store one calculator for a year. To reorder, there is a fixed cost of $5, plus $2.50 for each calculator. How many times per year should the store order calculators, and in

The store should order 60 calculators, 12 times per year to minimize inventory cost.

Explanation:

Given that;

Annual demand = 720 calculators

Holding cost (Storage cost) (H) = $2 per calculator

Ordering cost (D) = $5

Economic order quantity (EOQ)

= √ 2 × A × D / H

= √ (2 × 720 × $5) / $2

= √ $7,200 / $2

= √ 3,600

= 60 calculators

Number of orders per year

= Annual demand ÷ EOQ

= 720 ÷ 60

= 12 times

Therefore, the store should order 60 calculators 12 times per year to minimize inventory cost.

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