Tool Mart sells 1,400 electronic water pumps every year. These pumps cost $54.30 each. If annual inventory carrying costs are 12% and the cost of placing an order is $90, what is the firm's EOQ?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is given by $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the ordering cost per order, and $H$ is the annual holding cost per unit. Here, $D = 1400$ units, $S = $90$, and $H = 12\%$ of the cost per unit, which is $0.12 \times $54.30 = $6.516$. Plugging these values into the EOQ formula gives $\sqrt{\frac{2 \times 1400 \times 90}{6.516}} \approx 197$.

Tool Mart Sells 1,400 Electronic Water Pumps Every Year