Orange Company expects demand for a product to be 12,005 units annually. It costs $5 per unit to hold inventory for one year. Order costs are $50 per order. The economic order quantity is:

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where D is the demand, S is the ordering cost, and H is the holding cost per unit per year. Plugging in the values: $EOQ = \sqrt{\frac{2*12005*50}{5}} = \sqrt{240100} \approx 490$ units.

Orange Company Expects Demand for a Product to Be 12,005