Annual demand equals 1,500 units, delivered purchase cost equals $60/unit, annual inventory carrying cost percentage equals 25% and ordering cost equals $50/order. What is the Economic Order Quantity (EOQ) in units and dollars and how many orders will need to be made in a year?

Question

Business

Janessa Eaton

19 October, 01:27

Annual demand equals 1,500 units, delivered purchase cost equals $60/unit, annual inventory carrying cost percentage equals 25% and ordering cost equals $50/order. What is the Economic Order Quantity (EOQ) in units and dollars and how many orders will need to be made in a year?

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Answers (1)

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Terrence Duncan · Answer 1

EOQ in terms of quantity=100 units

EOQ in terms of dollars=$6,000

Order to be made in the year=15 orders

Explanation:

The EOQ for the given data in the question shall be determined through following formula:

EOQ = (2AOc/Hc) ^1/2

A=Annual demand=1,500

Oc=Cost per order=$50

Hc=holding cost per unit=25%*60=$15

EOQ in terms of quantity = (2*1,500*50/15) ^1/2=100 units

EOQ in terms of dollars=100*60=$6,000

Order to be made in the year=Annual demand/EOQ

=1,500/100=15 orders