The annual demand for Product P is 300,000 units and an order for new inventory is placed each month. Each order costs $267 to place. The cost of holding Product P in inventory is 10 cents per unit per year. Buffer inventory equal to 40% of one month’s sales is maintained.
Required :The total cost of an ordering policy using the economic order quantity
I cannot figure out the calculation for the EOQ....Cost of holding is puzzling why did the examiners put .10 to the power 0.5??
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December 2013 Q3
10y ago#1Writing something to the power 0.5 means the same as taking the square root.
The EOQ = square root of ( 2 x 300,000 x 267 / 0.10 )
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