Chocolate Ltd uses 18,000 litres of chocolate syrup each year. The cost of carrying its chocolate syrup inventory is $0.50 per litre per year. The cost of ordering the syrup is $150 per delivery. The firm uses chocolate syrup at a constant rate throughout the year. The economic order quantity for chocolate syrup is:

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2DS)/H), where D is the demand (18,000 litres), S is the ordering cost ($150), and H is the holding cost per unit ($0.50). Plugging in these values gives EOQ = sqrt((2*18000*150)/0.5) = 3,286 litres.

Chocolate Ltd Uses 18,000 Litres of Chocolate Syrup Each Year