Phelps Corporation
Phelps Corporation's EOQ for Material A is 500 units.This EOQ is based on:
$\begin{array}{ll}
\text { Annual demand } &5,000 units \
\text {Ordering costs } & \$ 12.50 \

\end{array}$
.

Refer to Phelps Corporation.What is the annual carrying cost per unit for Material A?

Question

Phelps Corporation
Phelps Corporation's EOQ for Material A is 500 units.This EOQ is based on:
$\begin{array}{ll}
\text { Annual demand } &5,000 units  \
\text {Ordering costs } &  \$ 12.50 \

\end{array}$
.

Refer to Phelps Corporation.What is the annual carrying cost per unit for Material A?

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where D is the annual demand, S is the ordering cost, and H is the annual holding or carrying cost per unit. Given that the EOQ is 500 units, and with the provided data (D = 5,000 units and S = $12.50), we can rearrange the formula to solve for H: $H = \frac{2DS}{EOQ^2}$. Plugging in the numbers: $H = \frac{2 * 5000 * 12.50}{500^2} = \frac{125000}{250000} = 0.50$. Therefore, the annual carrying cost per unit for Material A is $0.50.

Phelps Corporation Phelps Corporation's EOQ for Material a Is 500 Annual demand 5,000unitsOrdering costs $12.50\begin{array}{ll}\text { Annual demand } &5,000 units \\\text {Ordering costs } & \$ 12.50 \\\end{array} Annual demand Ordering costs ​5,000units$12.50​

Phelps Corporation
Phelps Corporation's EOQ for Material a Is 500 $\begin{array}{ll}\text { Annual demand } &5,000 units \\\text {Ordering costs } & \$ 12.50 \\\end{array}$