Question

A museum of natural history opened a gift shop that operates throughout the year. Top-selling product is a bird feeder. Annual demand for the bird feeder is 933 units. Cost per order is $55. Annual holding cost per unit is $19. Assuming that the shop uses the EOQ as the order size, what would be the total holding cost for the bird feeder

Answer 1

$1396.5

Step-by-step explanation:

EOQ or economic order quantity formula is given as:

`EOQ = \sqrt{(2DC_o)/(H_c)}`

Where, D = demand per year

C_0 = ordering cost and H_c = holding cost per unit per year

`EOQ = \sqrt{(2*933*55)/(19)}`

EOQ= 73.5 units

Since, the order size is EOQ then, total holding cost

= holding cost per unit per year × EOQ

=73.5×19

=$1396.5