An appliance repair service center estimates that the annual demand for a standard replacement motor for a washing machine is 100 units.Order placement costs are $8; each motor costs $50 and annual carrying costs per unit are 20 percent of purchase cost.The economic order quantity is 13 units.

Question

Quizplus · Accepted Answer

The calculation for economic order quantity (EOQ) is as follows:

EOQ = sqrt((2DS)/H)

Where: 
D = annual demand = 100 units
S = order placement cost = $8
H = annual carrying cost per unit = 20% of $50 = $10

Plugging in these values, we get:

EOQ = sqrt((2*100*8)/10) = 40

Therefore, the statement "The economic order quantity is 13 units" is false.

An Appliance Repair Service Center Estimates That the Annual Demand