Question

The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. What is the economic order quantity for the XO-01

Answer 1

EOQ = 200 units

Step-by-step explanation:

We can easily calculate the Economic order quantity by putting values EOQ formula. All you need is the data for calculation.

DATA

Annual demand = 8,000

Ordering cost = $50

Holding cost = $20

EOQ =?

Formula

EOQ =
`\sqrt{(2CoD)/(Ch) }`

Where

Co = Ordering cost

D = Demand

Ch = Holding cost

Solution

EOQ =
`\sqrt{\frac{{2(50)(8000)} }{20}}`

EOQ =
`\sqrt{(800000)/(20) }`

EOQ = 200 units