Question

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 |

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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