Answer: A) The Economic Order Quantity is 601 units.
B)The Economic Order Quantity is 425 units.
C )The Economic Order Quantity is 849 units
Explanation:
EOQ, economic order quantity = [tex]\sqrt{ 2 x Dx S/ H}[/tex]
where D= demand
S = Order cost
H= holding cost.
a)when D = 8,200 per month, S = $44 per order, and H = $2.00
EOQ, economic order quantity = [tex]\sqrt{2x D x S /H}[/tex]
= [tex]\sqrt{2 x 8,200 x 44 /2 }[/tex] = [tex]\sqrt{360,800}[/tex] = 600.666= 601 units
b) if the holding cost doubles, holding cost = HX 2 = 2 X 2 = 4
EOQ, economic order quantity =[tex]\sqrt{ 2 x D xS /H }[/tex]
= [tex]\sqrt{2 X 8,200 X 44 / 2 X $2}[/tex] = [tex]\sqrt{180,400}[/tex] = 424.73 = 425units
C) if the holding cost drops in half, holding cost = H/2 = 2 X 1/2 = 1
EOQ, economic order quantity =[tex]\sqrt{ 2 x D xS /H }[/tex]
= [tex]\sqrt{2 X 8200 x 44/1}[/tex] = [tex]\sqrt{721,600}[/tex] = 849.47 = 849units
