Answer to Question #230512 in Management for Genine Kriegler

Question

Khuzawayo Construction a local sub-contractor expects to use 19 675 pockets of cement for 2021. Carrying costs are R 6.25 per unit and order costs are R 43.55. The organization works 315 Days per year. Determine:

3.1.1 The Economic Order Quantity (EOQ)

Answer 1

Also referred to as 'optimum lot size,' the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stock outs, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.