If D = 7,500 per month, S = $43 per order, and H = $1.50 per unit per month, a) What is the economic order quantity? (round your response to the nearest whole number). b) How does your answer change if the holding cost doubles? (round your response to the nearest whole number). c) What if the holding cost drops in half? (round your response to the nearest whole number).

a) 656 units per order

b) 464 units per order

c) 927 units per order

Explanation:

Given;

Demand, D = 7500 per month

S = $ 43 per order

Holding cost H = $ 1.5 per unit per month

a) The economic order quantity (EOQ) is calculated as:

EOQ = √ (2 * D * S / H)

on substituting the values, we get

EOQ = √ (2 * 7500 * 43 / 1.50)

or

EOQ = 655.74 ≈ 656 units per order

b) Now,

for double holding cost i. e H = 2 * $ 1.5 = $ 3 per unit per month

we have,

EOQ = √ (2 * 7500 * 43 / 3)

or

EOQ = 463.68 ≈ 464 units per order

hence, answer decreases i. e the economic order quantity decreases.

c) Now,

the holding cost decreases to half i. e H = 0.5 * $ 1.5 = $ 0.75

thus,

EOQ = √ (2 * 7500 * 43 / 0.75)

or

EOQ = 927.36 ≈ 927 units per order

hence, the economic order quantity increases.