Question

A retail operation sells computers. Each computer retails for $499. The monthly holding cost for each computer is $4. Placing an order costs $1000, regardless of the quantity of computers ordered. The monthly demand for computers at this operation is 320. Using the basic EOQ model, the economic order quantity is

Answer 1

Answer:

400

Explanation:

Calculation to determine the economic order quantity is using the basic EOQ model,

Using this formula

EOQ=√(2[Demand][Order cost] / [Unit holding cost])

Where,

Demand=320

Order cost =$1,000

Unit holding cost =$4

Let plug in the formula

EOQ=√2*320*1,000/$4

EOQ=√640,000/$4

EOQ=√160,000

EOQ=400

Therefore the economic order quantity is using the basic EOQ model is 400