Black Appliances is trying to determine the optimal order quantity for dryers for the next twelve months.Annual sales are expected to be 1,000,000 units at a retail price of $400 each.The cost of carrying dryers is $80 per year.Studies show that it costs Black $250 to prepare and receive an order.What is the EOQ?
A) 2,750
B) 2,500
C) 2,000
D) 1,850

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2DS)/H), where D is the demand (1,000,000 units), S is the ordering cost ($250), and H is the holding cost ($80). Plugging in the values gives EOQ = sqrt((2*1,000,000*250)/80) = 2,500.

Black Appliances Is Trying to Determine the Optimal Order Quantity