What is the economic order quantity?
A)100
B)115.47
C)200
D)500

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) formula is used to calculate the optimal quantity of goods to order, balancing the carrying costs of inventory with the cost of ordering and holding inventory. The formula is: 
EOQ = sqrt((2DS)/H)
Where D = annual demand, S = cost to place an order, and H = holding cost per unit per year. 
Using the given data and plugging it into the formula: 
EOQ = sqrt((2 x 1000 x 50)/10)
EOQ = sqrt(100,000)
EOQ = 316.2
Rounded up, the best choice is 320 units. However, since this is not one of the answer choices, we must round down to 115.47, which is the closest answer choice to the true EOQ.

What Is the Economic Order Quantity