One of the primary products your firm offers sells for $42.99 a unit. The variable cost per unit is $27.30 and the carrying cost per unit is $.36. You sell 4,250 of these units each year. The fixed cost to order this item is $32. What is the economic order quantity?

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 calculated using the following formula:EOQ = √(2*D*O)/Hwhere:D = annual demandO = ordering costH = carrying cost per unitIn this case, the annual demand is 4,250 units, the ordering cost is $32, and the carrying cost per unit is $0.36. Plugging these values into the formula, we get:EOQ = √(2*4,250*$32)/$0.36 = 869 unitsTherefore, the economic order quantity is 869 units.

One of the Primary Products Your Firm Offers Sells for $42.99