A Company Has Steady Annual Demand of 4,000 Units $$E O Q = \sqrt { \frac { 2 C _ { O } D } { C _ { H } } }$$

question 8

Multiple Choice

A company has steady annual demand of 4,000 units.Ordering costs £250 per order.The holding cost is £8 per unit per year.
Using the Economic Order Quantity,what is the optimum order quantity for the company,and how many orders should be placed per year?
Formula: $$E O Q = \sqrt { \frac { 2 C _ { O } D } { C _ { H } } }$$

• A) Order 4,000 units at a time, with a total of 1 order per year
• B) Order 16 units at a time, with a total of 250 orders per year
• C) Order 500 units at a time, with a total of 8 orders in the year
• D) Impossible to calculate, since we do not know cost per unit

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Definitions:

Trillion

A numerical value representing one thousand billion, or 10^12 in the United States and other countries using short scale numbering.

Total Savings

The aggregate amount saved by individuals, businesses, and the government, often measured over a specific time period.

Capital Formation

The process of building up the stock of physical and financial assets in an economy, often through investment in productive assets.

Autonomous Consumption

The level of consumption that occurs when income is zero; it represents the expenditures that consumers must make even when they have no income.