Question

Stlyez Corp. has a monthly demand of 2,000 units for a product. The product is used at a constant rate over the 365 days. The annual holding cost for the product is estimated to be $4.00 per unit and the cost of placing each order is $150.00. Current order quantity (lot size) is 1000 units.

If Stlyez Corp. orders as per EOQ, how many orders will be placed annually?

Select one:

A) 21

B) 18

C) 6

D) 5

E) None of the above

Answer 1

B. 18

ANNUAL DEMAND = 24000

ORDERING COST = 150

HOLDING COST = 4

EOQ = SQRT(2 * ANNUAL DEMAND * ORDERING COST / HOLDING COST PER UNIT) = SQRT(2 * 24000 * 150 / 4) = 1342

ORDER FREQUENCY = DEMAND / EQQ = 24000 / 1342 = 18