Question at position 22 Given the following information, what is the EOQ for this company: Average demand per week = 135 The ordering cost = $135 The inventory holding rate per year = 4% Unit cost = $50 Assume 50 weeks per year975 units955 units305 units191 units

Question

Question at position 22 Given the following information, what is the EOQ for this company: Average demand per week =  135 The ordering cost =  $135 The inventory holding rate per year =  4% Unit cost = $50 Assume 50 weeks per year975 units955 units305 units191 units

BlackTom AI · Accepted Answer

We start by identifying the EOQ formula and the given data. The EOQ (economic order quantity) is EOQ = sqrt( (2 * D * S) / H ), where D is annual demand, S is the ordering cost per order, and H is the annual holding cost per unit.

First, translate the weekly demand into annual demand: the average demand is 135 units per week and there are 50 weeks per year, so D = 135 * 50 = 6,750 units per year.

Next, the ordering cost per order is S = $135.

The inventory holding rate is 4% of the unit cost per year. The unit cost is $50, so the annual holding cost per unit is H = 0.04 * 50 = $2 per unit per year.

Now compute the numerator of the EOQ formula: 2 * D * S = 2 * 6,750 * 135. Calculate 6,750 * 135 first: 6,750 * 100 = 675,000; 6,750 * 30 = 202,500; 6,750 * 5 = 33,750; summing gives 911,250. Multiply by 2 yields 1,822,500.

Divide by H: 1,822,500 / 2 = 911,250.

Take the square root: sqrt(911,250) ≈ 954.8.

This result is approximately 955 units when rounded to the nearest whole unit.

Now evaluate the presented options:
- 975 units: This value is close to the computed EOQ but slightly higher. It would imply a slightly larger order size than the precise calculation, and would affect both inventory levels and ordering frequency.
- 955 units: This aligns with the rounded EOQ we calculated (approximately 954.8). It matches the mathematical result when rounded to the nearest unit.
- 305 units: This is far smaller than the computed EOQ. Such a value would result in more frequent orders and higher ordering costs, and it does not fit the standard EOQ calculation with the given D, S, and H.
- 191 units: Also much smaller than the calculated EOQ, again implying much more frequent ordering and not consistent with the input data.

In summary, the EOQ computation using the standard formula with the supplied numbers yields a value near 955 units, and among the options, 955 units is the one that corresponds to the computed result when rounded.

Question at position 22 Given the following information, what is the EOQ for this company: Average demand per week = 135 The ordering cost = $135 The inventory holding rate per year = 4% Unit cost = $50 Assume 50 weeks per year975 units955 units305 units191 units

View Explanation

Log in for full answers

Similar Questions

Question at position 20 The annual demand of a certain item is 5,400 units and the computed EOQ is 900 units. What will be the time between orders in months?6 months 4 months3 months 2 months

EOQ should be used if you use a make-to-order strategy and the customer specifies that the entire order be delivered in one shipment.

Considering the EOQ model, larger lots are justified with higher holding costs.

An item experiences an annual demand of 3,600 units. It costs $10 to hold an item in inventory for one year and $20 to place an order. If the EOQ model is used, what is the time between orders? Assume that there are 52 business weeks in a year.

The EOQ is the smallest lot size that a supplier will allow a customer to order.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler