It costs View Your World, a high- end window manufacturer, $50 for each order of windows they place. View Your World sells 2,000 windows a year and each window that is held in inventory costs $500 per year. What is the economic order quantity?
A)20
B)50
C)40
D)10

Question

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 formula:EOQ = sqrt((2*D*O)/H)where:D = annual demandO = ordering costH = holding costIn this case, D = 2,000 windows, O = $50, and H = $500. Plugging these values into the formula, we get:EOQ = sqrt((2*2,000*$50)/$500) = 20Therefore, the economic order quantity is 20 windows.

It Costs View Your World, a High- End Window Manufacturer