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Massa Machine Tool expects total sales of $60,000. The price per unit is $10. The firm estimates an ordering cost of $25 per order, with an inventory cost of $0.70 per unit. What is the optimum order size?

Respuesta :

Answer:

The optimal order size is 654.

Explanation:

As we know that: EOQ = Squareroot (2DS/H)

 where :

S= ordering cost = $25 per order

H = Holding cost per unit = 0.70 per unit

D= Annual demand,sales = 60000/10 = 6000 units

        Solution:

                        =  Squareroot ( 2 * 6000 * 25 ) / 0.70

                        =  Squareroot (300000/0.70)

                         = Squareroot (428571)

              EOQ = 654

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