Walrus Company has the following information available concerning one of its inventory items: $$\begin{array} { l r }
\text { Cost of placing an or der } & \$ 30.00 \
\text { Unit carrying cost per year } & \$ 3.00 \
\text { Annual unit demand } & 6,625 \
\text { Safety stock } & 125 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$$ The economic order quantity for this item is
A)1,500 units.
B)364 units.
C)140 units.
D)725 units.

Question

Walrus Company has the following information available concerning one of its inventory items: $$\begin{array} { l r } 
\text { Cost of placing an or der } & \$ 30.00 \
\text { Unit carrying cost per year } & \$ 3.00 \
\text { Annual unit demand } & 6,625 \
\text { Safety stock } & 125 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$$ The economic order quantity for this item is
A)1,500 units.
B)364 units.
C)140 units.
D)725 units.

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the cost of placing an order, and $H$ is the annual holding cost per unit. Substituting the given values: $D = 6,625$, $S = \$30$, and $H = \$3$, we get $\sqrt{\frac{2 \times 6625 \times 30}{3}} = \sqrt{132500} \approx 364$ units.

Walrus Company Has the Following Information Available Concerning One of Its