The High-Rise Building Company uses 400,000 tons of stone per year.The carrying costs are $100/ton.The cost per order is $500.Calculate the economic order quantity per order.

Question

Quizplus · Accepted Answer

The formula for Economic Order Quantity (EOQ) is:

EOQ = sqrt((2DS)/H)

D = Annual demand = 400,000 tons
S = Cost per order = $500
H = Carrying cost per unit = $100

Plugging in these values:

EOQ = sqrt((2*400000*500)/100)
EOQ = 2,000

Therefore, the economic order quantity per order is 2,000 tons. This means that it is most efficient for the company to order 2,000 tons of stone at one time, as this minimizes the total ordering and carrying costs.

The High-Rise Building Company Uses 400,000 Tons of Stone Per