Question

Cavu Air, Inc. presents the following information: Number of items used 525 Frequency of order 52...

Cavu Air, Inc. presents the following information:

Number of items used 525
Frequency of order 52
Carrying cost per unit   $55.00
Fixed order cost $395.00

Calculate the EOQ.

233.67
644.01
626.20
202.68
Business   Finance   
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Homework Answers

Answer #1

Hi,

Formula:

Calculation:

Demand (D) = No of items used * Freq of order (annually)

= 525 * 52

= 27,300 units

Ordering cost (per unit) = $395

Carrying cost (per unit) = $55

Substituting these values in the formula, EOQ = Sqrt [ (2*395*27,300) / 55 ]

Solving the above, EOQ = 626.20

Regards,

Bala

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