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19 February, 17:43

A certain type of computer costs $10 per unit, and the annual holding cost is 25% of the value of the item. Annual demand is 1,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? 346 120,000 866 1095 110

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  1. 19 February, 18:17
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    Annual demand (D) = 1,000 units

    Ordering cost (Co) = $150

    Holding cost per item per annum = 25% x $10 = $2.50

    EOQ = √2DCo

    H

    EOQ = √2 x 1,000 x $150

    $2.50

    EOQ = 346 units

    Explanation:

    EOQ is the square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum. EOQ is the quantity of stock that is bought each time a replenishment order is placed.
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