Each year you sell 1,200 units of a product at a price of $59.99 each. The variable cost per unit is $37.91 and the carrying cost per unit is $4.57. You have been buying 175 units at a time. Your fixed cost of ordering is $80. What is the economic order quantity?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2DS)/H), where D is the demand (1,200 units), S is the ordering cost ($80), and H is the carrying cost per unit ($4.57). Plugging in these values gives EOQ = sqrt((2*1200*80)/4.57) = 205 units.

Each Year You Sell 1,200 Units of a Product at a Price