Norwich Company has determined the following costs are associated with one of its products.$E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad $ $\quad $ $\quad $ $\quad $$\quad $4800
$P =$ Cost of placing one order (f) $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad $8

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The Economic order quantity (EOQ) is

A)10 units.
B)74 units.
C)60 units.
D)25 units.

Question

Norwich Company has determined the following costs are associated with one of its products.$E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad $ $\quad $   $\quad $ $\quad $$\quad $4800
$P =$ Cost of placing one order (f) $\quad $ $\quad $ $\quad $ $\quad $  $\quad $ $\quad $ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad $8

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The Economic order quantity (EOQ) is

A)10 units.
B)74 units.
C)60 units.
D)25 units.

Quizplus · Accepted Answer

The formula for calculating EOQ is √[(2DS)/H], where D is annual demand, S is ordering cost per order, and H is holding cost per unit. As the cost associated with the product is not mentioned in the question, we cannot calculate EOQ. Therefore, we have to guess the answer based on the options provided.

Option A) 10 units: This is highly unlikely as the cost associated with placing an order would be too high, leading to a high ordering cost per unit.

Option B) 74 units: This is possible, but it seems too high for a single order. Additionally, holding costs would also be too high.

Option C) 60 units: This seems the most plausible option. It falls within a reasonable range of units to order, considering the cost associated with placing an order and holding costs.

Option D) 25 units: This is very unlikely as the cost associated with placing the order would be too high, leading to a high ordering cost per unit.

Thus, the best choice with the given options is C) 60 units.

Norwich Company Has Determined the Following Costs Are Associated with One