Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $1.15 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 158,520 golf balls at a rate of 3891 balls per week. Martin's Golf Supplies earns 8% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

What is the economic order quantity? (Round costs to the nearest cent and quantities to the nearest whole number.)
A) 183 cartons
B) 274 cartons
C) 275 cartons
D) 367 cartons

Question

Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $1.15 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 158,520 golf balls at a rate of 3891 balls per week. Martin's Golf Supplies earns 8% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

What is the economic order quantity? (Round costs to the nearest cent and quantities to the nearest whole number.)

What is the economic order quantity? (Round costs to the nearest cent and quantities to the nearest whole number.)
A) 183 cartons 
B) 274 cartons 
C) 275 cartons 
D) 367 cartons

Quizplus · Accepted Answer

Annual Demand / 158,520 / 72 = 2202 cartons
Carrying Cost per carton = ($1.15 × 72 × 8%) + $0.87 = $7.49
EOQ =
 11ea1398_f0ea_d5c6_a1e4_8fecae571a6c_TB3027_11 
EOQ = $274.3 cartons - round to $274

Short Grass Incorporated Is a Distributor of Golf Balls