Question

Tile Depot, specializing in retail of construction materials, carries a popular flooring tile. The annual demand is estimated to be 5,000 cases. The ordering cost of this tile is $250 per order and the carrying cost is $10 per case per year. Tile Depot opens six days per week that is equivalent to 300 working days per year. The lead time for this item is usually two weeks or 12 working days. The economic ordering quantity (EOQ) for this item is a.$250 b.$300 c.$400 d.$500 e.$600

Answer 1

EOQ = 500 units

Step-by-step explanation:

Step-by-step explanation:

The Economic Order Quantity (EOQ) is the order quantity that minimizes the balance of holding cost and ordering cost. At the EOQ, the holding cost is exactly the same as the ordering cost.

It is calculated as follows:

EOQ = √(√2× Co D)/Ch)

Co- ordering cost - 250,

Ch - holding cost - 10

D- annual demand- 5000

So we apply the formula:

EOQ = √(2× 250 × 5,000/10)

EOQ = 500 units

Answer 2

d.$500

Step-by-step explanation:

Economic order quantity is the quantity at which business incur minimum cost. This is the level of order where the holding cost equals to the ordering cost of the business.

As per given data

Annual Demand = 5,000 cases

Ordering cost = $250

Carrying cost = $10

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

EOQ =
`\sqrt{(2 X 250 X 5,000)/(10) }`

EOQ = 500