Question

Use the information below to calculate the number of orders per year when using the EOQ: Annual demand for an item is 43,000 units The cost to place an order is $200 The per unit cost of the item is $50.00 The annual holding rate is 35% Choose the closest answer.

Answer 1

Answer:

The closest answer is 49.

Explanation:

Given that,

Annual demand, D = 43,000 units

Ordering cost, O = $200

Per unit cost of the item = $50

Annual holding cost, H =  annual holding rate × Per unit cost of the item

                                      = 35% × $50

                                      = $17.5

$EOQ=\sqrt{\frac{2\times D\times O}{H} }$

$EOQ=\sqrt{\frac{2\times 43,000\times 200}{17.5} }$

              = 991.39

              = 992 units

Therefore,

Number of orders per year = Annual demand ÷ EOQ

                                             = 43,000 ÷ 992

                                             = 43.34

Hence, the closest answer is 49 and this is not given in the question.