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elena-s [515]
2 years ago
14

A farmer needs 500 vats of fertilizer a week during the summer. He has a barn that can hold plenty of vats which cost around $1

a week for storage & handling per vat. The ordering costs for a new order are $250 regardless of the order size. What is the EOQ for this farmer during the summer months? a. $250,000 b. $354 c. $500 d. $250
Business
1 answer:
Simora [160]2 years ago
5 0

Answer:

option (c) $500

Explanation:

Data provided in the question:

Demand, D = 500 vats of fertilizers

Cost, C = $1

Ordering costs for a new order, F = $250

Now,

Economic Order Quantity = \sqrt{\frac{2FD}{C}}

on substituting the respective values, we get

Economic Order Quantity = \sqrt{\frac{2\times250\times500}{1}}

or

Economic Order Quantity = √250,000

or

Economic Order Quantity = 500

Cost of Economic Order Quantity = 500 × $1 = $500

Hence,

the answer is option (c) $500

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