Burley Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order}&\$ 50.00\
\text {Unit carrying cost per year }& \$ 2.00 \
\text { Annual unit demand}&3,200\
\text {Safety stock }&80\
\text {Average daily demand }&10\
\text {Normal lead time in days }&12\
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?
A)16 units
B)400 units
C)500 units
D)160,000 units

Question

Burley Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order}&\$ 50.00\
\text {Unit carrying cost per year }& \$ 2.00 \
\text { Annual unit demand}&3,200\
\text {Safety stock }&80\
\text {Average daily demand }&10\
\text {Normal lead time in days }&12\
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?
A)16 units
B)400 units
C)500 units
D)160,000 units

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the cost of placing an order, and $H$ is the annual holding cost per unit. Plugging in the values from the question: $D = 3,200$ units, $S = \$50$, and $H = \$2$, we get $\sqrt{\frac{2 \times 3,200 \times 50}{2}} = \sqrt{160,000} = 400$ units.

Burley Company Has the Following Information Available Concerning One of Its