Table 5.1
Fred Jacobs, assistant manager of Home and Hearth, is reviewing the costs associated with the store's best-selling frying pan. The data available to Mr. Jacobs concerning this frying pan follow.
$$\begin{array} { l l }
\text { Demand } & = 20 \text { units/week } \
\text { Order cost } & = \$ 75 / \text { order } \
\text { Holding cost } & = \$ 15 / \text { unit/year }
\end{array}$$
Home and Hearth operates 50 weeks per year.
-Use the information in Table 6.1.Jacobs has recently learned of the economic order quantity in his business management class.If Home and Hearth implemented the EOQ,which of the following statements is TRUE?
A) The annual order cost and holding cost would increase.
B) The economic order quantity would be greater than 125 units.
C) The annual order cost would increase.
D) The annual holding cost would increase.

Question

Table 5.1
Fred Jacobs, assistant manager of Home and Hearth, is reviewing the costs associated with the store's best-selling frying pan. The data available to Mr. Jacobs concerning this frying pan follow.
 $$\begin{array} { l l } 
\text { Demand } & = 20 \text { units/week } \
\text { Order cost } & = \$ 75 / \text { order } \
\text { Holding cost } & = \$ 15 / \text { unit/year }
\end{array}$$ 
Home and Hearth operates 50 weeks per year.
-Use the information in Table 6.1.Jacobs has recently learned of the economic order quantity in his business management class.If Home and Hearth implemented the EOQ,which of the following statements is TRUE?
A) The annual order cost and holding cost would increase.
B) The economic order quantity would be greater than 125 units.
C) The annual order cost would increase.
D) The annual holding cost would increase.

Quizplus · Accepted Answer

The EOQ is the optimal quantity to order to minimize the total inventory costs. The total inventory costs are the sum of the order costs and the holding costs. The order costs are the costs of placing an order, and the holding costs are the costs of holding inventory. The EOQ is the quantity that minimizes the total inventory costs.In this case, the order cost is $75 per order, and the holding cost is $15 per unit per year. The demand is 20 units per week, and Home and Hearth operates 50 weeks per year. The EOQ is:```EOQ = sqrt((2 * D * O) / H)```where:* D = demand* O = order cost* H = holding costPlugging in the values, we get:```EOQ = sqrt((2 * 20 * 75) / 15) = 125 units```Therefore, the EOQ is 125 units. If Home and Hearth implemented the EOQ, the annual order cost would increase because they would be placing more orders. The annual holding cost would decrease because they would be holding less inventory.

Table 51 Fred Jacobs, Assistant Manager of Home and Hearth, Is

Table 51
Fred Jacobs, Assistant Manager of Home and Hearth, Is