A company wishes to minimise its inventory costs. Order costs are $10 per order and holding costs are $0.10 per unit per month. Fall Co estimates annual demand to be 5,400 units.
What is the economic order quantity?
________ units
The economic order quantity is 300 units.
The formula for the economic order quantity (EOQ) is
EOQ
With Co
$10
D
5,400 ¸ 12 = 450 per month
CH
$0.10
300 units
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