How to calculate economic order quantity

Business & Finance
Tutor: None Selected Time limit: 1 Day

Cheeseburger and Taco Company purchases 9,800 boxes of cheese each year. It costs $25 to place and ship each order and $8.92 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders.

 Calculate Economic Order Quantity.

Oct 5th, 2015

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Economic Order Quantity is the order quantity that minimizes total holding and ordering costs for the year.

A = Demand for the year

Cp = Cost to place a single order

Ch = Cost to hold one unit inventory for a year

 2*9800*25/8.9= 490,000/8.9

find the square root of the result to get the Economic order quantity

 Answer =234.64  units per year

Please let me know if you need any clarification. I'm always happy to answer your questions.
Oct 5th, 2015

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