Answer:
EOQ = = 15,491.93 units
Optimal order interval 18.8 days (19.36 orders in year)
Total cost = $150,774.60
Explanation:
<em>The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost.</em>
It is computed using he formulae below
EOQ = √ (2× Co× D)/Ch
<em>Co- ordering cost per order- 20, </em>
<em>Ch -Holding cost per unit per annum- 10%× $0.5= 0.05</em>
<em>Annual demand: D- 300,000</em>
EOQ = √(2× 20 * 2,580)/(10%× 0.5)
= 15,491.93 units
Assuming 365 days, the optimal order interval in dates
Number of orders per year
= annual demand/EOQ
= 300,000/ 15,491.93
= 19.36 times
<u><em>in days:</em></u>
= EOQ/300,000 × 365 days
= (15,491.93/ 300,000) × 365 days
= 18.8 days
Total annual cost =
<em>Total cost Purchase cost + Carrying cost + ordering cost </em>
$
Purchase cost = $0.5 × 300,000 = 150,000
Carrying cost = (15,491.93/2) * 10%*0.5 = 387.29
Ordering cost = (300,000/15,491.93 ) × 20 = <u>387.29</u>
Total cost 1<u>50,774.60</u><u> </u>
