Haulsee Inc. builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each. Ordering costs are $540, and Haulsee's inventory carrying costs average 14% of the inventory value. What is the EOQ for Haulsee?

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Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand (800,000 units), $S$ is the ordering cost ($540), and $H$ is the holding cost per unit per year (14% of $370). First, calculate $H = 0.14 \times 370 = 51.8$. Then, plug the values into the EOQ formula: $\sqrt{\frac{2 \times 800,000 \times 540}{51.8}} \approx 4,083.66$, which rounds to 4,084.