Question:
Economic Order Quantity
Tanaka Suzuki inventory control manager for Itex receives wheel bearings from wheel right a small producer of metal parts. Unfortunatley wheel right can only produce 500 wheel bearings per day Itex recieves 10000 wheel bearings from wheel-right per year. Since Itex operates 200 working days each year its average daily demand for wheel bearings is 50. the ordering cost for Itex is $40 per order and the carring cost is 60 cents per wheel bearing per year.
How many wheel bearings should Itex order from Wheel-right at one time?
Wheel-right has agreed to ship the maximum number of wheel bearings that it produces each day to Itex when an order has been received.