A firm sells 13,000 units a year. The carrying cost per unit per year is $0.84. As a policy, orders are placed at 400 units each. The fixed cost per order is $64. What is the economic order quantity?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand (13,000 units/year), $S$ is the ordering cost ($64/order), and $H$ is the holding cost per unit per year ($0.84/unit/year). Plugging in the values: $\sqrt{\frac{2*13000*64}{0.84}} \approx 1407$ units.

A Firm Sells 13,000 Units a Year