Question

Garden Variety Flower Shop uses 900 clay pots annually. The pots are purchased at $2 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are $20 per order. What is the EOQ

Answer 1

EOQ= 255 units

Step-by-step explanation:

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs.

To calculate the EOQ, we need to use the following formula:

Economic order quantity (EOQ)= √[(2*D*S)/H]

D= Demand in units

S= Order cost

H= Holding/carriying cost

EOQ= √[(2*900*20)/0.6]

EOQ= 255 units