3. In your new position, the area leader asked you how much the company should order to minimize the total cost of one of the items used. You decide to compute the economic order quantity. If the annual demand is 100 units, the order placement cost is $25, and the holding cost per unit per year is $50, how many units would you suggest? You may 2DK find useful the following information: Q Vh
3. In your new position, the area leader asked you how much the company should order to minimize the total cost of one of the items used. You decide to compute the economic order quantity. If the annual demand is 100 units, the order placement cost is $25, and the holding cost per unit per year is $50, how many units would you suggest? You may 2DK find useful the following information: Q Vh
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3. In your new position, the area leader asked you how much the company should order to minimize the total cost of one of the items used. You decide to compute the economic
order quantity. If the annual demand is 100 units, the order placement cost is $25, and the holding cost per unit per year is $50, how many units would you suggest? You may
find useful the following information: Q* =
2DK
-
h
Numeric Response
Expert Solution
Step 1
Lets understand the basics.
Economic order quantity is a quantity at which entity can meet its demand at the minimum carrying and holding cost.
For determining economic order quantity we need to use below formula.
Q =
Where,
D = Annual demand
K = Ordering cost per order
H = Holding cost per unit
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