Pink 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 formula is:
EOQ = √[(2DS)/H]
Where:
D = Annual demand = 12,005 units
S = Ordering cost = $50 per order
H = Holding cost per unit per year = $5 per unit
Plugging in the values, we get:
EOQ = √[(2 x 12,005 x 50)/5]
EOQ = √[1,200,500]
EOQ ≈ 1,095 units
Therefore, the best choice is D, which is the closest option to the calculated EOQ of 1,095 units.

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