Question

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?

Answer 1

Answer:

EOQ = 35

Explanation:

EOQ: To calculate the optimum level of quantity to be ordered so we don't mismatch the demand in order to control the cost.

Formula:

$EOQ= \sqrt{\frac{2* D * S }{H} }$

Where;

D= Annual demand per unit.

S = Cost per order.

H= Holding cost, which is calculated by Holding cost % into total units

Given Data:

D= 1000 units.

S= $150.

H= 25% * 1000 = $250

Putting the values into the formula:

$EOQ= \sqrt{\frac{2* 1000* 150}{250} }$

EOQ = 35