Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the optimal EOQ order quantity?

Question

Quizplus · Accepted Answer

The EOQ formula is √((2DS)/H), where D is demand (525 kits), S is the order cost ($10), and H is the holding cost per unit ($12 * 15% = $1.8). Plugging in these values gives √((2*525*10)/1.8) ≈ 76.4.

Flanders Bar and Grill Orders Cleaning Supply Kits Using the EOQ