Answer to Question #256728 in Management for Binx

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: The Total Cost of the inventory.

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.