Olga Company has an economic order quantity for item B of 100 units. The annual demand for the product is 1,400 units, and the unit carrying cost per year is $7. What is the cost of placing an order?
A)$25
B)$8
C)$200
D)$2

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is given by $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the cost of placing an order, and $H$ is the annual holding cost per unit. Rearranging the formula to solve for $S$, we get $S = \frac{H \cdot EOQ^2}{2D}$. Plugging in the given values: $S = \frac{7 \cdot 100^2}{2 \cdot 1400} = 25$. Therefore, the cost of placing an order is $25.

Olga Company Has an Economic Order Quantity for Item B