Torque Manufacturing forecasts that its production will require 500,000 tons of bauxite over its planning period.Demand for Torque's products is stable over time.Ordering costs amount to an average of $20.00 per order.Holding costs are estimated at $1.25per ton of bauxite.EOQ for Torque is

Question

Quizplus · Accepted Answer

To calculate EOQ, we need to use the following formula:

EOQ = sqrt((2DS)/H)

where

D = annual demand = 500,000 tons
S = ordering cost = $20.00 per order
H = holding cost = $1.25 per ton

Thus,

EOQ = sqrt((2 * 500,000 * 20)/1.25) = sqrt(1,600,000) = 1,264.91 tons

Therefore, the best choice is C, which is the closest option to the calculated EOQ of 1,265 tons.

Torque Manufacturing Forecasts That Its Production Will Require 500,000 Tons