Question

William​ Beville's computer training​ school, in​ Richmond, stocks workbooks with the following​ characteristics: Demand D = 19,100 ​units/year

Ordering cost S = ​$26​/order
Holding cost H ​= $3​/unit/year
A) Calculate the EOQ for the workbooks.
B) What are the annual holding costs for the workbooks?
C) What are the annual ordering costs?

Answer 1

Answer: EOQ = 575.38 units ≈ 575 units

Annual holding cost =$862.5 ≈ $863

annual ordering cost=$863.65 ≈ $864

Step-by-step explanation:

a)the EOQ for the workbooks=
`√( 2 X Demand x ordering cost / holding cost)`

=
`√(2 x 19,100 x 26 / 3)` =
`√(331,066.667)`

= 575.38 units ≈ 575 units

b)the annual holding costs for the workbooks

Annual holding cost = Economic order quantity x Holding cost /2

= (575 x 3)/2=$862.5 ≈ $863

c) the annual ordering costs = Demand X Ordering cost/ EOQ

= 19,100 x 26/575

=$863.65 ≈ $864