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 optimal number of orders per year.
A)400
B)100
C)200
D)300

Question

Quizplus · Accepted Answer

We can use the Economic Order Quantity (EOQ) formula to calculate the optimal number of orders per year:

EOQ = √(2SD/H)

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

Plugging in these values, we get:

EOQ = √(2 x 400,000 x 500 / 100) = 200

Therefore, the optimal number of orders per year is 200.

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