Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,050 units. His cost to carry one unit is $105 per year per unit, and he has estimated that each order costs $26 to place. Using the EOQ model, how many should Ray order each time

By using the EOQ model, ray should order 22.8 units or 23 units each time

Explanation:

Solution

Recall that:

Ray annual estimated demand for this model is = 1,050 units

The cost of one unit carry is = $105

He estimated each order costs to place = $26

Now,

The EOQ model = (2*annual demand*ordering cost/holding cost per unit per year) ^.5

Thus,

EOQ = (2*1050*26/105) ^.5

EOQ = 22.8 units or 23 units