Question

Using the simple order quantity model in an inventory control problem, Kathy calculated the order quantity to be 1000 units. In a review, she found out that the demand is actually double that of the quantity she had used and the holding cost is only half that of the value she used, The new economic order quantity using the correct data will be:

A. 1000
B. 2000
C. 1414
D. 707.1
E. cannot be found without other cost information.

Answer 1

Economic order quantity will be 2000

So option (B) will be correct answer

Step-by-step explanation:

We have given order quantity is 1000

Order quantity is given by
`EOQ=\sqrt{(2DO)/(H)}`, here D is demand, O is order and H is holding cost

So
`1000=\sqrt{(2DO)/(H)}` ........equation 1

Now order is doubled and holding cost is halved

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

`EOQ=2\sqrt{\frac{ 2D* O}{{H}}}`

From equation 1

`EOQ=2* 1000=2000`

So economic order quantity will be 2000

So option (B) will be correct answer