Question

A firm has the following gross requirements for Item OF. Ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F Period
LT: 1 1 2 3 4
Gross Requirements 60 40 80 60
Schedule Receipts
Project on Hand 100
Net Requirements
Planned Order Receipts
Planned Order Releases

If EOQ lot sizing is used the minimum order quantity would be:_______

a. 85
b. 100
c. 120
d. 150

Answer 1

c. 120

Step-by-step explanation:

The economic order quantity is the minimum amount of inventory that a seller must keep to demand and lower the holding cost. The formula for Economic order quantity is represented by the formula:

EOQ =
`\sqrt{(2*Demand*Ordering Cost)/(Holding cost) }`

EOQ =
`\sqrt{(2*240*60)/(0.5) }`

EOQ = 120