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) (4)

3.1.2 The number of orders per year (3)

3.1.3 The length of the order cycle. (3)

3.1.4 The Total Cost of the inventory. (5)

Answer 1

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.