A traffic control systems firm has historically ordered 50 control boards at a t

Question

A traffic control systems firm has historically ordered 50 control boards at a time because the boards are large and take up valuable space in the company's limited climate controlled storage area. The company has decided to expand and build a new climate controlled warehouse. In the warehouse there will be a locked cage area dedicated to control board storage. You have been asked to determine minimum space that will be needed for the caged area for control boards if the company follows the EOQ when determining how many to order. The control boards take up 1 square feet each. The firm has a demand of 4000 units per year and a board cost per unit of $120. Ordering cost is $50 per order, and the holding charge is $2 a unit per month. How large will the cage need to be (at a minimum) to accommodate the anticipated maximum inventory. Choose the nearest answer O 447 sq ft O 223 sq ft o 129 sq ft O 65 sq ft O 31 sq ft

Explanation / Answer

EOQ = sqrt(2*Demand*Ordering cost/Holding cost) = sqrt(2*4000*50/2) = 447.2

The area required = Quantity*size of each board = 447.2*1 = 447 square ft.

Ans: 447

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