Question

If the annual demand for a specific product is 14,000, the annual holding costs is 0.50 per unit, and the ordering cost per order is is 50, what is the Economic Order Quantity? Round to the nearest whole number (e.g. 234.3845 would be "234").

BONUS: In addition to answering below (for IW credit) on a sheet of graph paper NEATLY graph Ordering Costs, Carrying Costs, and Total Costs for the following problem. Turn in your hand-written graph at the beginning of the first class period of week 14 for a 25% bonus on the week 14 quiz. HINTS: 1) each of your curves should go well above the EOQ; 2) start your axis labels by putting the EOQ in the middle of the x-axis to make your graph fit best. Carrying Costs are linear, so it only takes two points to make that line; OC and TC lines are non-linear, so you'll need to plot several points for each and then draw a "smoothed" line neatly by hand. Show values on the axes that match the problem above.

Your Answer:

Answer 1

Annual Demand, D	14000	units
Annual holding cost, Cc	0.5	per unit
Ordering cost, Co	50	per order
EOQ= sqrt(2*Co*D/Cc)=	1673	units
Q	Carrying Cost	Ordering Cost	Total Cost
1454	$ 363.58	$ 481.32	$ 844.90
1527	$ 381.83	$ 458.32	$ 840.15
1600	$ 400.08	$ 437.41	$ 837.49
1673	$ 418.33	$ 418.33	$ 836.66
1746	$ 436.58	$ 400.84	$ 837.42
1819	$ 454.83	$ 384.76	$ 839.59
1892	$ 473.08	$ 369.92	$ 843.00
Carrying Cost = (Q/2)*Cc
Ordering Cost = (D/Q)*Co
Total Cost = Carrying Cost + Ordering Cost

FORMULAE USED: