Question

A certain type of computer costs $10 per unit, and the annual holding cost is 25% of the value of the item. Annual demand is 1,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? 346 120,000 866 1095 110

Answer 1

The economic order quantity (EOQ) for the given computer model is approximately 346 units, calculated using the EOQ formula based on the provided costs and annual demand.

Step-by-step explanation:

The student is asking about determining the economic order quantity (EOQ) for a computer model with specific cost parameters. To find the EOQ, we use the following formula:

EOQ = √((2DS)/H)

where:
D = Annual demand for the product
S = Order cost per order
H = Annual holding cost per unit of the product

Given the annual demand (D) is 1,000 units, the order cost (S) is $150, and the annual holding cost per unit (H) is 25% of the item's cost, that is 0.25 x $10 = $2.50. Plugging these values into the EOQ formula:

EOQ = √((2 x 1,000 x 150)/2.50) = √(300,000/2.50) = √(120,000) = 346.41

The approximate EOQ is therefore 346 units (often rounded to the nearest whole number).

Answer 2

Annual demand (D) = 1,000 units

Ordering cost (Co) = $150

Holding cost per item per annum = 25% x $10 = $2.50

EOQ = √2DCo

H

EOQ = √2 x 1,000 x $150

$2.50

EOQ = 346 units

Step-by-step explanation:

EOQ is the square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum. EOQ is the quantity of stock that is bought each time a replenishment order is placed.