Question

Demand for an item is 1,000 units per year. Each order placed costs $10;theannualcosttocarryitemsininventoryis$2 each. In what quantities should the item be ordered?

Short answer

The desire of people to acquire products as well as services at specific pricing is referred to as demand.

Step-by-step solution

Demand

Demand is defined as the number of customers that are willing and able to purchase things at various prices over a specific time period. Demand for any product denotes customers' desire to get the item, as well as their desire or capacity to pay for it.

Calculation

According to the EOQ model,

$\begin{array}{rcl}\text{Q}& =& \frac{\sqrt{2\text{DS}}}{H}\\ & =& \frac{\sqrt{2+1000\times 10}}{2}\\ & =& 2\text{units.}\end{array}$