PQR CO

The EOQ is 6000 units (ask again if you did not get that correct). In total the demand is 7500 per month, which is 12 x 7500 = 90,000 a year. So, they will have to place an order 90,000/6,000 = 15 times a year. Assuming 365 days in a year, they will therefore need to place an order every 365/15 = 24.3 days (so 24 to the nearest day).

Hi John Thank you very much, it makes sense now. Much appreciated. Regards, Agnes

You are welcome :-)

Hi. Sorry. No matter what I do I cannot come up with 6000 as the EOQ. EOQ = SQUARE RT ((2xORDER COST x DEMAND\HOLDING COST) = _|2x100x90,000 / 45,000 So that spits out square root of 400 = 20 which is ridiculous. I get the holding cost as 10% of Purchase price per year so 90,000 units x $5 x 10% Please help as this is driving me mad. Thanks

The holding cost - Ch in the formula - is the cost of holding one unit for one year, which is 10% x $5 = 0.50. Now it should work :-) I do suggest that you watch the free lectures on inventory control.