How to calculate economic order quantity

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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

Thank you for the opportunity to help you with your question!

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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