Swanson Supplies has an economic order quantity of 100 units for item X of inventory. The annual demand for the product is 1,400 units and the cost to place an order is $25. What is the unit carrying cost?

Question

Quizplus · Accepted Answer

The formula to calculate the Economic Order Quantity (EOQ) is:

EOQ = √((2 x Annual Demand x Cost per order) / Carrying Cost per unit)

Based on the information provided, we know that:

Annual Demand = 1,400 units
Ordering Cost = $25 per order
EOQ = 100 units

Substituting these values into the formula for EOQ, we get:

100 = √((2 x 1,400 x 25) / Carrying Cost per unit)

Simplifying this equation, we get:

Carrying Cost per unit = $7.00

Therefore, the unit carrying cost for item X of inventory is $7.00.

The best choice is B.

Swanson Supplies Has an Economic Order Quantity of 100 Units