Question

What is the economic order quantity if the annual demand is 10,000 units, set up cost of placing each order is $3 and the holding cost per unit per year is $2?

a.174
b.123
c.245
d.116

Answer 1

The economic order quantity (EOQ) can be calculated using the formula: square root of (2SD/H), where S is the set-up cost per order, D is the annual demand, and H is the holding cost per unit per year. In this case, the EOQ is 200 units. Option b.

Step-by-step explanation:

The economic order quantity (EOQ) is a formula that helps determine the optimal order quantity for inventory management. It is calculated by taking the square root of (2SD/H), where S is the set-up cost per order, D is the annual demand, and H is the holding cost per unit per year.

In this case, the set-up cost is $3, the annual demand is 10,000 units, and the holding cost is $2 per unit per year. Plugging these values into the formula, we get the EOQ as 200 units. Therefore, the correct answer is option b.123.

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