Question

We need 25000 units per year. Two suppliers for those units have provided us their quotes. The order cost is $300 per order and holding cost is $30 per unit per month. a.) What is the economic order quantity

Answer 1

EOQ = 204.124 rounded off to 204 units

Step-by-step explanation:

The EOQ or economic order quantity is the optimal order quantity that a company should order every time in order to minimize the inventory related costs such as holding, ordering and shortage/stock out costs. The formula o calculate EOQ is attached.

Holding cost per unit per annum = 30 * 12 = $360

EOQ = √(2 * 25000 * 300) / 360

EOQ = 204.124 rounded off to 204 units