Question

If D = 8,000 per month, S = $45 per order, and H = $2 per unit per year,A. what is the economic order quantity?B. How does your answer change if the holding cost doubles?c. What if the holding cost drops in half?

Answer 1

Answer:

A. EOQ =600

B. EOQ =424.26

C.EOQ =848.53

Explanation:

Demand (D) = 8,000 units per month

Order cost (S) = $45 per order

The economic order quantity (EOQ) is given by:

$EOQ=\sqrt{\frac{2DS}{H}}$

A. Holding cost (H) = $2 per unit

$EOQ=\sqrt{\frac{2*8,000*45}{2}}\\EOQ =600$

B. Holding cost (H) = $4 per unit

$EOQ=\sqrt{\frac{2*8,000*45}{4}}\\EOQ =424.26$

C. Holding cost (H) = $1 per unit

$EOQ=\sqrt{\frac{2*8,000*45}{4}}\\EOQ =848.53$