Question

QUESTION 26 Anlarge auto repair shop has been purchasing windows for cars there were the two por you, and that ordering costs about 254 perce. The current pictwo The Moon what demand (D) is their current action optimal units per order 250 units holding cost 525 per unit per ye Jorder cost 5254 per order product cost 5.200 per un

Answer 1

Economic order quantity (EOQ) is the optimal order quantity to minimize the cost and it can be calculated in following manner –

EOQ = √ (2 * Annual Demand * Ordering cost/ Holding cost)

Where,

Economic order quantity (EOQ) (units per order) = 250 units

Annual Demand (D) =?

Ordering cost (S) = $254 per order

Carrying Or Holding cost (H) = $25 per unit per year

Product cost = $200 per unit

Therefore,

250 = √ (2 *D * 254/25)

Or 250^2 = (2 *D * 254/25)

Or D = (250 *250 *25)/ (2 * 254)

Or D = 3,075.79 or 3,076 unit (rounding off to nearest whole number)

Therefore annual Demand (D) should be 3,076 units to justify EOQ order quantity of 250 units