Q.2 The Kenneth State organization sells a product for which the annual demand is 5000 units....
Q.2 The Kenneth State organization sells a product for which the annual demand is 5000 units.
The average holding cost is $ 1.00 per unit per year, and the ordering cost is $ 100 per order.
- What is the economic order quantity for the product?
- What is the total annual cost for this EOQ?
Q.2 The Kenneth State organization sells a product for which the annual demand is 5000 units.
The average holding cost is $ 1.00 per unit per year, and the ordering cost is $ 100 per order.
- What is the economic order quantity for the product?
- What is the total annual cost for this EOQ?
***Please do NOT use handwriting***
Homework Answers
a) The economic order quantity (EOQ) is
D = Annual demand = 5000
S = Ordering cost per unit = $100
H = total holding cost = $ 1
=
1000 units
b) The total annual cost for this EOQ C = (EOQ/2)*H + (D/Q)*S = (1000/2)*1 + (5000/1000)*100 = $ 1000.
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