A local distributor for a Belgian chocolate manufacturer expects to sell 12,000 cases of chocolate truffles next year.The annual holding costs for the truffles are $16 per case per year.The ordering cost is $60 per order.The distributor operates 320 days a year.Then ______.
A)the EOQ is 200
B)the EOQ is 300
C)the EOQ is 400
D)the EOQ is 500

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand (12,000 cases), $S$ is the ordering cost ($60), and $H$ is the holding cost per unit per year ($16). Plugging in the values, we get $\sqrt{\frac{2*12000*60}{16}} = \sqrt{90000} = 300$. Therefore, the EOQ is 300 cases.

A Local Distributor for a Belgian Chocolate Manufacturer Expects to Sell