Home Sweet Home Company orders plywood from LaForge. Home Sweet Home has an ordering cost of $45. Carrying cost is 20%, and annual demand is 100 sheets. What do you recommend?

Annual demand (D) = 100 sheets

Ordering cost (Co) = $45

Unit cost = $10 (assumed)

Holding cost (H) = 20% x $10 = $2

This is an incomplete question. Unit cost was omitted in the question. Thus, $10 is assumed.

EOQ = 2DCo

H

EOQ = 2 x 100 x $45

2

EOQ = 67 units

Explanation:

EOQ is the square root of 2 multiplied annual demand and ordering cost per order divided by holding cost per item per annum. Holding cost is usually a function of unit cost. The unit cost was not given. Thus, a unit of $10 is assumed. Holding cost is 20% of unit cost.