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What is the economic order quantity for the inventory item to the nearest whole unit?

Asked by Adalyn, Last updated: Apr 18, 2024

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4 Answers

Y. Dawne

Y. Dawne

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Y. Dawne
Y. Dawne, Content Blogger, Diploma in Journalism, Amsterdam, Netherlands

Answered Feb 07, 2019

1,461. (2x20 x (4x20,00)/Co.06x25^0.5=1,461 Units. In marketing, carrying the cost of inventory or holding cost refers to the total cost of holding inventory, which includes cost such as rent expressed as a percentage of the cost of inventory. The economic order aggregate is the number of individual units that a company should add to items such as holding, order costs, and shortages. The EOQ is utilized as a portion of a continuous review inventory system where the inventory is surveiled at all times and a fixed quantity each time the inventory level reaches a specific reorder point. Some companies use an auto-replenishment system.

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John Adney

John Adney

John Adney
John Adney

Answered Oct 21, 2017

The purchase price of an inventory item is $25 per unit. In each three month period the usage of the item is 20,000 units. The annual holding costs associated with one unit equate to 6% of its purchase price. The cost of placing an order for the item is $20. What is the economic order quanity for the inventory item to the nearest whole unit?

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John Adney

John Adney

John Adney
John Adney

Answered Feb 18, 2017

1,461

{[ 2 x 20 x (4 x 20,000)] / [0.06 x 25]}^0.5 = 1,461 units
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John Smith

John Smith

John Smith
John Smith

Answered Sep 13, 2016

1,461

{[ 2 x 20 x (4 x 20,000)] / [0.06 x 25]}^0.5 = 1,461 units
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