A product has a demand of 4000 units per year.Ordering cost is $20,and holding cost is $4 per unit per year.The cost-minimizing solution for this product is to order:
A)all 4000 units at one time.
B)200 units per order.
C)every 20 days.
D)10 times per year.
E)none of the above

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to minimize the total cost of ordering and holding inventory. EOQ = sqrt((2 * Demand * Ordering Cost) / Holding Cost). Plugging in the values: EOQ = sqrt((2 * 4000 * 20) / 4) = 200 units per order.

A Product Has a Demand of 4000 Units Per Year