How many tyres should MWV order at once? (Hint: Consider a 12-month timeframe and recall that each bicycle requires two tyres.)?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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MaWheelo Vaya (MWV) manufactures 450 high-end bicycles a month. It buys the tyres for the bicycles from a Chinese supplier at a cost of R400 per tyre. The yearly inventory carrying cost is estimated to be 15% of the tyre price and placing an order costs R1 000. How many tyres should MWV order at once? (Hint: Consider a 12-month timeframe and recall that each bicycle requires two tyres.)? 

Expert Solution
Given information

Annual Demand (D) = 450 * 12 * 2 = 10,800 tyres
Price (P) = R 400
Carrying Cost (C) = 15% of P = R 60
Ordering Cost (O) = R 1000

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