LAMA Creations creates sweaters using the wool of the Llama. The wool used in the manufacturing process is ordered by the bundle. LAMA requires 1,200 bundles of Llama wool per year and places orders of 100 bundles at a time. The cost of ordering is $80.00 per order and the carrying cost per bundle is $3.50. What is the economic order quantity for Lama Creations.
A) 235 bundles
B) 117 bundles
C) 470 bundles
D) 200 bundles

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2DS)/H), where D is the demand (1,200 bundles), S is the ordering cost ($80), and H is the carrying cost per bundle ($3.50). Plugging in the values, EOQ = sqrt((2*1200*80)/3.5) = 235 bundles.

LAMA Creations Creates Sweaters Using the Wool of the Llama