ECONOMIC ORDER QUANTITY

Please put your answers in 1 whole yellow paper. Show your solutions. 

1. A firm estimates that its annual carrying cost for material X is $.30 per lb. If the firm
requires 50,000 lbs. per year, and ordering costs are $100 per order, what is the EOQ
(rounded to the nearest pound)?

2. Z Corp.’s EOQ for Material A is 500 units. This EOQ is based on:

Annual demand 5,000 units

Ordering costs $12.50

What are Z Corp.’s total annual ordering costs for Material A?

3. The Whitehead Co. produces quality jewelry items for various retailers. For the coming
year, it has estimated it will consume 500 ounces of gold. Its carrying costs for a year are
$2 per ounce. If the EOQ is 100 ounces, what would be the estimate for Whitehead’s
total carrying costs for the coming year?

4. Bell Company estimates that it will consume 400,000 units of Part A in the coming year.
The ordering cost for this unit is $3.20. What would be the carrying costs per unit if the
EOQ model indicates that it is optimal to place exactly 50 orders for the upcoming year?

5. A company has estimated its economic order quantity for Part A at 2,400 units for the
coming year. If ordering costs are $200 and carrying costs are $.50 per unit per year,
what is the estimated total annual usage?

6. Z Corp.’s EOQ for Material A is 500 units. This EOQ is based on:

Annual demand 5,000 units

Ordering costs $12.50

What is the annual carrying cost per unit for Material A?

7-10. List the limitations/assumptions in using the Economic Order Quantity (EOQ) Model.