Smith and Jones, Inc. is evaluating its inventory costs. The following information is available: Annual demand.........................4,500 units

Question:

Smith and Jones, Inc. is evaluating its inventory costs. The following information is available:

Annual demand.........................4,500 units

Quantity ordered..........................100 units

Ordering costs (K)........................$25 per order

Carrying costs (H)........................$10 per unit

The economic order quantity for Smith and Jones, Inc. is:

a. 100 units

b. 150 units

c. 450 units

d. 625 units

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...