Question

Swiftspan inc. is a construction company. it uses 202,500 gallons of paint a year. if the ordering costs are $32 per order and holding costs are $9 per gallon, the optimal quantity of order is _____.

Answer 1

1,200 Gallons.

Economic ordering quantity (EOQ) is the most cost efficient amount to order that minimizes both carrying and order costs. The formula is

$\sqrt{(2*units *ordering costs)/holding costs$

$\sqrt{405,000*32 / 9$

$\sqrt{1,440,000$

1,200 gallons