Question

For each of the following independent cases, use the equation method to compute the economic order quantity

Case A Case B Case C

Annaul requirement (in units) 13,230 1,681 560

Cost per order 250 40 10

Annual holding per unit 6 20 7

Answer 1

Answer:

Economic Order Quantity = SQRT [( 2* Annual Requirement * Cost per Order) / Holding Cost per unit]

Case A:

Economic Order Quantity = SQRT [(2 * 13,230 * 250) / 6]
Economic Order Quantity = SQRT (1,102,500)
Economic Order Quantity = 1,050 Units

Case B:

Economic Order Quantity = SQRT [(2 * 1,681* 40) / 20]
Economic Order Quantity = SQRT (6,724)
Economic Order Quantity = 82 Units

Case C:

Economic Order Quantity = SQRT [(2 * 560 * 10) / 7]
Economic Order Quantity = SQRT (1,600)
Economic Order Quantity = 40 Units