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A company orders and uses 6,000 cans of paint each year. Each order has a fixed shipping cost of $150 and an additional cost of $2 per can of paint. To store a can for a full year costs $5. What is the optimal number of cans of paint the company should buy during each order

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anthougo

The optimal number of cans of paint the company should buy during each order is 604 cans.

What is the optimal order quantity?

The optimal order quantity represents the economic order quantity.

The economic order quantity is the order quantity that minimizes total costs.

The economic order quantity can be computed using the EOQ model, which is equal to the square root of [2(setup costs)(demand rate)] / holding costs.

Data and Calculations:

Annual demand = 6,000

Ordering cost per order:

Fixed ordering cost = $150

Variable ordering cost = $2 per can

Holding cost = $5 per can

EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.

= square root of (2 x $152 x 6,000)/$5

= square root of 364,800

= 604 cans

Thus, the optimal number of cans of paint the company should buy during each order is 604 cans.

Learn more about the economic order quantity at https://brainly.com/question/26814787

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