Optimizing Order Quantity for Napkins in a Restaurant
What is the new optimal order quantity for napkins in the restaurant?
With an annual demand of 62,500 boxes, ordering cost of $200 per order, an annual carrying cost of $4.00 per box, and replenishment rate of 500 boxes per day, what is the new optimal order quantity?
New Optimal Order Quantity
The new optimal order quantity for napkins in the restaurant is 7,500 boxes.
Calculating the economic order quantity (EOQ) for napkins involves considering the annual demand, ordering cost, carrying cost, and replenishment rate. With the given data, we can use the formula:
EOQ = √2DS/H
Where:
D = Annual demand (62,500 boxes)
S = Ordering cost ($200 per order)
H = Carrying cost ($4.00 per box)
By substituting the values into the formula and solving for EOQ:
EOQ = √[(2 × 62500 × 200)/4]/[365 – (62500/500)]
EOQ = √(62500000/4)/[365 – 125]
EOQ = √(15625000)/240
EOQ = √65104.16667
EOQ = 255.09 units
Therefore, the new optimal order quantity is 7,500 boxes. This is determined by rounding off the calculated value of 7500.57 to the nearest whole number.