Answer the following question(s) using the information below:
Green Grass Incorporated is a distributor of golf balls. Garry's Golf Supplies is a local retail outlet which sells golf balls. Garry's purchases the golf balls from Green Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Green Grass Incorporated pays all incoming freight, and Garry's Golf Supplies does not inspect the balls due to Green Grass' reputation for high quality. Annual demand is 172,800 golf balls at a rate of 3,322 balls per week. Garry's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

-What is the economic order quantity?

Question

Answer the following question(s) using the information below:
Green Grass Incorporated is a distributor of golf balls. Garry's Golf Supplies is a local retail outlet which sells golf balls. Garry's purchases the golf balls from Green Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Green Grass Incorporated pays all incoming freight, and Garry's Golf Supplies does not inspect the balls due to Green Grass' reputation for high quality. Annual demand is 172,800 golf balls at a rate of 3,322 balls per week. Garry's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
 
-What is the economic order quantity?

Quizplus · Accepted Answer

EOQ = (2DS/H)^0.5 where
D = annual demand in units = 172,800
S = cost per order = $10
H = holding cost per unit per year = $0.09 (calculated as 12% of $0.75)
Therefore, EOQ = (2*172,800*10/0.09)^0.5 = 287.93 which is rounded to 288 cartons.
The best choice is B as it minimizes the total cost of inventory by balancing the ordering and holding costs.

Answer the Following Question(s) Using the Information Below