Question

Calculate the EOQ size for the following case. What is the EOQ size and the number of orders placed per year? For your answer, round up the figures up to 0 decimal points. (size/number) The annual demand for the item is 2580 units. It costs $500 to place an order and costs $20 per item to carry it a year without passing it to the customer.

Answer 1

EOQ = 359 units

Number of order placed = 7.2 times

Step-by-step explanation:

The Economic Order Quantity (EOG) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the ordering cost.

It is computed using he formulae below

EOQ = √ (2× Co× D)/Ch

C0- 500, Ch- 20, D- 2,580

EOQ= √ (2× 500× 2580)/20

=359.16

EOQ = 359 units

Number of order place d per year = Annual demand / order size

Number of order placed = 2,580/ 359

= 7.2 times