Consider a basic economic order quantity (EOQ) model with the following characteristics: Item cost............$15 Item selling price.........$20

Question:

Consider a basic economic order quantity (EOQ) model with the following characteristics:

Item cost............$15

Item selling price.........$20

Monthly demand.........500 units (constant)

Annual holding cost.......9% of purchase cost

Cost per order..........$18

Order lead time........5 days

Firm's work year.........300 days (50 weeks @ 6 days per week)

Safety stock..........15% of monthly demand

The optimal Order Quantity, Q* is

a. 115

b. 223

c. 400

d. 1549

e. None of the above

Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...