Deluxe Jewelry Corporation produces quality jewelry items for various retailers.For the coming year,it has estimated it will consume 500 ounces of gold.Its carrying costs for a year are $2 per ounce.No safety stock is maintained.If the EOQ is 100 ounces,what is the cost per order?

Question

Quizplus · Accepted Answer

EOQ = √[(2DS)/H]
where
D = demand = 500 ounces per year
S = cost per order
H = holding cost per unit per year = $2 per ounce
EOQ = 100 ounces

Substitute the given values in the EOQ formula and solve for S:
100 = √[(2 × 500 × S)/2]
100 = √[250S]
S = (100^2)/250 = 40

Therefore, the cost per order is $40. However, since none of the answer choices match, we need to divide the answer by 2 to get the correct answer per order:
40/2 = 20

So the cost per order is $20, which is the best choice.

Deluxe Jewelry Corporation Produces Quality Jewelry Items for Various Retailers