Question

Compute the EOQ when the cost per order (S) is $222, the annual demand (D) is 1,000 , the carrying charge (i) is 11%, and the cost of the item is $32.

The economic order quantity is _____units. (Enter your response rounded to the nearest whole number.)

Answer 1

The economic order quantity (EOQ) is calculated based on the provided annual demand, cost per order, carrying charge, and cost of the item. For the given values, the EOQ is approximately 355 units when rounded to the nearest whole number.

Step-by-step explanation:

To compute the Economic Order Quantity (EOQ), we use the formula:

EOQ = √(2DS / H), where:

• D is the annual demand,
• S is the cost per order,
• H is the annual holding cost per unit, calculated as i (carrying charge) times the cost of the item.

Given the values:

• D = 1,000 units,
• S = $222,
• i = 11% or 0.11,
• Cost of item = $32.

The annual holding cost per unit (H) is calculated as:

H = i × Cost of item = 0.11 × $32 = $3.52.

Plugging in the values into the EOQ formula:

EOQ = √(2 × 1,000 × 222 / 3.52) = √(444,000 / 3.52) = √126136.36 ≈ 355 units.

The economic order quantity is 355 units when rounded to the nearest whole number.