Answer to Question #263741 in Economics for Kiki

Question

Sowane’s Computer Training School in Sigatoka stocks workbooks with the

following characteristics:

Demand D = 18,500 units/year

Ordering cost S = $26/order

Holding cost H = $4/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

a)

$$18,500\times26=481,000$$

b)

$$18,500\times4=74,000$$

c)

$$481,000+74,000=555,000$$