A company orders 240,000 windows per year. Every time a company orders windows from its suppliers, the supplier charges $1,000 in shipping and handling. The cost of keeping windows on hand, in terms of storage and maintenance costs, is $.25 per window. What quantity of windows should the company order?
A) 20,000
B) 30,984
C) 43,818
D) 60,000

Question

Quizplus · Accepted Answer

The optimal order quantity can be determined using the Economic Order Quantity (EOQ) formula: EOQ = sqrt((2DS)/H), where D is the demand (240,000 windows), S is the ordering cost ($1,000), and H is the holding cost per unit ($.25). Plugging in the values: EOQ = sqrt((2*240,000*1,000)/.25) = sqrt(1,920,000,000) ≈ 43,818. This makes option C the correct answer.

A Company Orders 240,000 Windows Per Year