Cheeseburger and Taco Company purchases 17,886 boxes of cheese each year.

Cheeseburger and Taco Company purchases 17,886 boxes of cheese each year. It costs $20 to place and ship each order and $6.76 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders.

Expert Solution

Economic order quantity(EOQ)

It is the size of the order for which both:

1. ordering and

2. carrying cost

are at a minimum.

It is used in an optimizing stock control system.

Economic order quantity is a reorder quantity.

Formula: EOQ=

√{(2× Annual Consumption ×Cost of placing an order)/Cost of carrying per unit per annum}

EOQ= √{(2× 17.886×20)/6.76}

EOQ=10.29

So it is best to place 10 boxes order each time as per economic order quantity.

jeff jeffy answered 2 years ago

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