Question

13. The following information relating to a type of raw material is available :Annual demand2,400 unitsUnit price2:405 Ordering cost per order*4.00Storage cost2% per annumInterest rate10% per annumLead timeHalf monthCalculate economic order quantity and total annual inventory cost in respect of the particular rawmaterial.​

Answer 1

Explanation:

The formula for economic order quantity is:

EOQ = square root of: [2SD] / H.

S = Setup costs (per order, generally including shipping and handling)

D = Demand rate (quantity sold per year)

H = Holding costs (per year, per unit)

By this formula you can solve this answer very easily