Canada CorpAssume that Canada Corp has sales of 5,000,000 gallons per year. Further, assume that Canada Corp can order the material at a cost of $160 per order, plus fixed ordering costs of $75 per order. The firm's carrying cost is 25% of the inventory value, at cost.
-Refer to Scenario: Canada Corp.What is Canada Corp.'s EOQ?
A)8,285
B)6,833
C)30,040
D)4,330

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand in units (5,000,000 gallons), $S$ is the ordering cost per order ($160 + $75 = $235), and $H$ is the holding or carrying cost per unit per year (25% of the inventory value at cost). However, without the cost per gallon, we cannot directly calculate $H$ as a dollar amount. Assuming the question intends for the total ordering cost ($235) to be used in place of $S$ and the carrying cost rate (25%) to be applied directly, the formula simplifies to $\sqrt{\frac{2 \times 5,000,000 \times 235}{0.25}}$. This calculation does not directly lead to any of the provided options without the cost per gallon to calculate the actual holding cost per unit. Given the options and the typical use of EOQ formula, there seems to be a misunderstanding or a missing piece of information necessary to calculate $H$ accurately. However, based on the standard approach to EOQ and the options provided, none directly align with the standard EOQ calculation without the cost per unit to determine $H$. If we proceed with an approximation or a standard EOQ calculation without specific inventory cost, we might attempt to align with the closest logical option based on EOQ principles, but without the exact cost per gallon, a precise EOQ calculation here is speculative.

Canada CorpAssume That Canada Corp Has Sales of 5,000,000 Gallons