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?

Answer 1

EOQ = 35

Step-by-step explanation:

EOQ: To calculate the optimum level of quantity to be ordered so we don't mismatch the demand in order to control the cost.

Formula:

`EOQ= \sqrt{(2* D * S )/(H) }`

Where;

D= Annual demand per unit.

S = Cost per order.

H= Holding cost, which is calculated by Holding cost % into total units

Given Data:

D= 1000 units.

S= $150.

H= 25% * 1000 = $250

Putting the values into the formula:

`EOQ= \sqrt{(2* 1000* 150)/(250) }`

EOQ = 35