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.
A)1,000 tons
B)2,000 tons
C)3,000 tons
D)4,000 tons

Question

Quizplus · Accepted Answer

Using the economic order quantity formula:

EOQ = √[(2DS)/H]

Where:
D = Annual demand = 400,000 tons
S = Cost per order = $500
H = Carrying cost per unit per year = $100/ton

Plugging in the values, we get:

EOQ = √[(2 × 400,000 × 500)/100] = √(4,000,000) = 2,000 tons

Therefore, the economic order quantity per order is 2,000 tons.

B is the only choice that matches the calculated value of EOQ, so it is the best choice.

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