Answer:
Using the lowest price of $210 offered by the supplier
Annual demand (D) = 90,000 units
Set-up cost per order (S) = $1,000
Holding cost per item per annum = 30% x $210 = $63
EOQ = √2DS
H
EOQ = √2 x 90,000 x $1,000
63
EOQ = 1,690 units
The correct answer is C
Explanation:
In this case, there is need to calculate the EOQ using the least price offered by the supplier. The least price gives the minimum total cost. EOQ is calculated as: 2 multiplied by annual demand and set-up cost divided by holding cost. The EOQ of 1,690 units gives the least total cost and thus recommended.
The economic order quantity is the level of quantities that a company can purchase in order to maintain and minimize inventory costs. The inventory costs will include the holding cost, shortage cost, and order costs per unit.
Given that:
1. Annual Demand is (D) = 90,000 units
2. Set-Up Cost is (S) = [tex]\[/tex] 1000 per order
3. Annual Holding Cost (H) = 30% of the Unit cost
4. Holding cost per annum = 30% x [tex]\[/tex] 210 = [tex]\[/tex] 63
From the data above, Economic Order Quantity can be calculated as:
EOQ = [tex]\sqrt{\dfrac{2 \;\text {DS} } {\text H} }[/tex]
EOQ = [tex]\sqrt {\dfrac {2 \times 90,000 \times {1000} }{63}[/tex]
EOQ = 1690 units.
Thus, the correct answer is Option C, 1690.
To know more about Economic Order Quantity, refer to the following link:
https://brainly.com/question/16986815
