Answer to Question #187288 in Economics for Tanmayee

Question

3. Enfield has its vehicle assembly plant in Tiruvottiyur, Chennai and its engine assembly plant in Oragadam near Chennai. Engines are transported between the two plants using trucks, with each trip costing Rs. 2000. vehicle plant assembles and sells 250 motorcycles every day. Each engine costs Rs. 25000, and MCL incurs a holding cost of 24 % per year.

a. How many engines should MCL load onto each truck? (i.e. what is the optimal order quantity?)

Answer 1

$$\frac {250\times25000\times0.24}{2000}=750$$