Question

demand for a certain product is random. It has been estimated that the monthly demand of the product has a normal distribution with a mend of 390units. The unit price of product is ETB 25. Ordering cost is ETB 40 per order and inventory carrying cost is estimated to be 35 percent per year. Calculate economic order quantity (EOQ)

Answer 1

The economic order quantity of the product with the demand of 390 units is 1392.86 units.

What is an economic order quantity?

This refers to an inventory management technique that helps make efficient inventory management decisions.

The formula for economic order quantity is $\sqrt{2 * D * S / H}$

Given data

Demand = 390 units.

Unit price of product is ETB 25.

Ordering cost is ETB 40 per order

inventory carrying cost is estimated to be 35 percent per yer

EOQ = $\sqrt{2*390*25/40*0.35}}$

EOQ = 19,500 / 14

EOQ = 1392.85714286

EOQ = 1392.86 units

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