Jasmine Company purchased a depreciable asset for $225,000. The estimated salvage value is $15,000, and the estimated useful lif
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Answer:
A. 566 pounds
Explanation:
Given: Demand for rice is very consistent= 200 pounds per month.
Cost of rice per order= $50 per order.
Rice cost= $5 per pound.
Carrying charge= 15%
EOQ: Economic order quantity (EOQ) is the number of units that company should include in their inventory with each order to reduce cost of inventory.
Now, calculating EOQ.
Formula; EOQ=
D= Demand in units for specified period.
P= relevant ordering costs per order.
C= Relevant carrying cost of one unit in stock for the time period used for D.
EOQ=
⇒ EOQ=
Opening parenthesis
⇒ EOQ=
⇒ EOQ=
∴ EOQ=
Hence, Economic order quantity is 566 pounds.