An electric company wishes determine the best order size for its best selling da
ID: 450525 • Letter: A
Question
An electric company wishes determine the best order size for its best selling data storage equipment. The company is estimated annual demand of 1000 units. The holding is 10% of selling price of 1000 and ordering cost is 25 to place. What is the economic order quantity?A 7 B 22.4 C 707 D 1000 An electric company wishes determine the best order size for its best selling data storage equipment. The company is estimated annual demand of 1000 units. The holding is 10% of selling price of 1000 and ordering cost is 25 to place. What is the economic order quantity?
A 7 B 22.4 C 707 D 1000
A 7 B 22.4 C 707 D 1000
Explanation / Answer
Calculation of Economic Order Quantity:
EOQ = Square root (2*d*s)/ h
Where, d is annual demand, h is carrying cost and s is ordering cost
h = 10% of selling price of 1000 = 10% of 1000 is 100
= Square root (2*1000*25)/ 100 = 22.36
Therefore, EOQ = 22.4 ( Option B)
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