Question

Probett Model C computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? 110 600 183 70 122

Answer 1

Answer:

110 units

Explanation:

Data given in the questions

Cost of the computer = $1,000

Annual holding cost = 25%

Annual demand = 10,000 units

Ordering cost  = $150

So, the carrying cost is

= $1,000 × 25%

= $250

The computation of the economic order quantity is shown below:

$= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}$

$= \sqrt{\frac{2\times \text{10,000}\times \text{\ 150}}{\text{\ 250}}}$

= 110 units

We simply applied the above formula so that approximate economic order quantity could come