Question

Assume the calculated EOQ for each quantity range is given below:

Quantity Price per unit Calculated EOQ
1 to 99 $110 75
100 to 199 $80 120
200 and up $50 190

In order to evaluate which ordering quantity is least costly, you should calculate the total cost associated with the range 1 to 99 units, using a quantity of__________ units, and the range 200 units and up, using a quantity of_____________ units.

Answer 1

In order to evaluate which ordering quantity is least costly, you should calculate the total cost associated with the range 1 to 99 units, using a quantity of___75___ units, and the range 200 units and up, using a quantity of____190____ units.

Step-by-step explanation:

a) Data:

Quantity Price per unit Calculated EOQ

1 to 99 $110 75

100 to 199 $80 120

200 and up $50 190

b) The calculated Economic Order Quantity (EOQ) is the optimal quantity that minimizes inventory costs which include holding, shortage, and ordering or production setup costs. The EOQ is computed as the square root of: [2(setup costs)(demand rate)] / holding costs. While EOQ is popular, its use is criticized on the ground that it is over-simplistic and relies largely on consistent data inputs. Consistent data does not reflect reality.