Braebner Corp. orders 500,000 microchips per year at an average cost of $130. The carrying cost of each chip is $25, and each order costs $150. Compute Braebner's EOQ.
A)23,846
B)2,449
C)17,333
D)3,005

Question

Braebner Corp. orders 500,000 microchips per year at an average cost of $130.  The carrying cost of each chip is $25, and each order costs $150.  Compute Braebner's EOQ.
A)23,846
B)2,449
C)17,333
D)3,005

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: $EOQ = \sqrt{\frac{2DS}{H}}$, where $D$ is the demand (500,000 microchips), $S$ is the ordering cost ($150), and $H$ is the holding cost per unit ($25). Plugging in the values: $EOQ = \sqrt{\frac{2*500,000*150}{25}} = \sqrt{60,000,000} = 2,449$.