Stan Lee's sells 4,300 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $21.63. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they are restocked. What is the economic order quantity?

Question

Quizplus · Accepted Answer

The economic order quantity can be calculated using the formula:

EOQ = √((2DS)/H)

where D is the annual demand, S is the setup cost, and H is the holding cost per unit.

We have all the necessary information:

D = 4,300
S = $69
H = $21.63

Plugging in the values, we get:

EOQ = √((2*4,300*69)/21.63)
    = √27,579.78
    ≈ 166

Therefore, the optimal order quantity is 166 carpets.

Stan Lee's Sells 4,300 Carpets a Year at an Average