A firm expects to sell 1,000 units of its best-selling product in the coming year.Ordering costs for this product are $100 per order, and carrying costs are $2 per unit.Compute the optimum order size, using the EOQ model.
A)10 units
B)224 units
C)317 units
D)448 units

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to determine the optimal order size that minimizes total inventory costs. The formula is EOQ = sqrt((2DS)/H), where D is the demand (1,000 units), S is the ordering cost ($100), and H is the carrying cost per unit ($2). Plugging in these values gives EOQ = sqrt((2*1000*100)/2) = sqrt(100,000) = 316.23, which is approximately 317 units.

A Firm Expects to Sell 1,000 Units of Its Best-Selling