Answer to Question #263826 in Economics for Tautau

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) $EOQ = \sqrt{2*18,500*26/4} = 490.4$ units.

b) The annual holding costs for the workbooks are:

490.4*4 = 1,961.63.

c) The annual ordering costs are:

490.4*26 = 12,750.61.