a) What is the optimal order quantity when Lisa purchases more than 10,001 pieces?
To determine the optimal order quantity when Lisa purchases more than 10,001 pieces, we need more information about the specific context or situation. The optimal order quantity can be calculated using various methods such as Economic Order Quantity (EOQ) or considering factors like carrying costs, ordering costs, and demand patterns.
1. Economic Order Quantity (EOQ): The EOQ formula calculates the optimal order quantity by minimizing the total cost of inventory. It considers the carrying costs and ordering costs associated with holding inventory. The formula is:
EOQ = √((2 * D * S) / H)
where:
- D represents the annual demand
- S represents the ordering cost per order
- H represents the holding or carrying cost per unit per year
To calculate the optimal order quantity using EOQ, you need to know the values of D, S, and H specific to Lisa's situation. With these values, substitute them into the formula, and then calculate the square root of the result to get the optimal order quantity.
2. Carrying Costs and Ordering Costs: In some cases, carrying costs and ordering costs may play a crucial role in determining the optimal order quantity. Carrying costs include expenses related to holding inventory, such as warehousing, insurance, and depreciation. Ordering costs refer to costs associated with placing orders, like documentation, transportation, and employee time.
To identify the optimal order quantity considering these costs, you need to:
a) Determine the carrying costs per unit per year (H) and ordering costs per order (S).
b) Analyze the impact of these costs on Lisa's inventory management.
c) Calculate the total costs associated with different order quantities.
d) Evaluate and compare the total costs for different order quantities to identify the optimal order quantity.
By following these steps and considering relevant cost parameters, Lisa can determine the optimal order quantity when purchasing more than 10,001 pieces.