Carmel Company uses 810 units of a part each year. The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $4.
-Refer to the Figure.What is the EOQ for Benton?
A)20
B)30
C)45
D)162

Question

Quizplus · Accepted Answer

The EOQ formula is √((2DS)/H), where D represents annual demand, S represents the setup cost, and H represents the holding cost per unit.

Plugging in the given values, we get: 
EOQ = √((2*810*10)/4) = √(16,200) ≈ 127.28

Rounding up to the nearest whole number, the EOQ is 128.

Therefore, the best choice is to order 128 units each time to minimize the total ordering and holding costs.

The options A and B are too small and would result in too many orders, increasing the ordering cost. Option D is too large and would result in excess inventory and higher holding costs. Option C provides the best balance between ordering and holding costs.

Carmel Company Uses 810 Units of a Part Each Year