Cindy Stewart and Misty Whitworth graduated from business school together. They now are inventory managers for competing wholesale distributors, making use of the scientific inventory management techniques they learned in school. Both of them are purchasing 85-horsepower speedboat engines for their inventories from the same manufacturer. Cindy has found that the setup cost for initiating each order is $200 and the unit holding cost is $400.

Cindy has learned that Misty is ordering 10 engines each time.

Cindy assumes that Misty is using the basic EOQ model and has the same setup cost and unit holding cost as Cindy. Show how Cindy can use this information to deduce what the annual demand rate must be for Misty’s company for these engines.