eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?
A)75 units
B)300 units
C)600 units
D)900,000 units

Question

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?
A)75 units
B)300 units
C)600 units
D)900,000 units

Quizplus · Accepted Answer

The economic order quantity (EOQ) is the optimal quantity of inventory to order at a time to minimize the total inventory costs. The EOQ is given by the following formula:EOQ = √(2*D*O)/Hwhere:D = annual unit demandO = cost of placing an orderH = unit carrying cost per yearIn this case, the EOQ is:EOQ = √(2*5,625*$32)/$4 = 300 unitsTherefore, the correct answer is B) 300 units.

Eal Company Has the Following Information Available Concerning One of Its