Question

P14-5 (similar to) Question Help SO EOQ analysis Tiger Corporation purchases 1,450,000 units per year of one component. The fixed cost per order is $52. The annual carrying cost of the item is 27.4% of its $9.68 cost. a. Determine the EOQ if (1) the conditions stated above hold, (2) the order cost is $1.00 rather than $52, and (3) the order cost is $52 but the carrying cost is $0.01. b. What do your answers illustrate about the EOQ model? Explain. a. (1) If there are no changes in the costs, the EOQ is units. (Round to the nearest integer. For infinity, input INF) Enter your answer in the answer box and then click Check Answer. 3 parts remaining Clear All Check Answer

Answer 1

EOQ = (2*Annual Demand*Cost per order/Carrying cost per unit per year)^1/2

EOQ = (2*1450,000*52/2.65232)^1/2

= 7540.28 units

i.e. 7540 units

2)EOQ = (2*1450,000*1/2.65232)^1/2

= 1045.65 units

i.e. 1046 units

3)EOQ = (2*1450,000*52/0.01)^1/2

= 122,800.65 units

i.e. 122,801 units

EOQ model minimises the sum of ordering cost and carrying cost

Answer 2

√(2×1200000×25)/0.54= 10541