- 1 Marks
Question
In Inventory Control, the Economic Order Quantity (EOQ) of an item is given as 500 units, ordering cost as ₦500 per order, and the demand for the item in six months is 2,500 units. What is the holding cost of a unit of the item per annum?
A. ₦10
B. ₦20
C. ₦30
D. ₦40
E. ₦50
Answer
Answer: B. ₦20
Explanation:
The formula for EOQ is:
Where:
- D= Annual demand
- S=Ordering cost
- H=Holding cost per unit per annum
Rearranging for H:
Given:
- EOQ=500
- S=500
- D=2,500×2=5,000 (since the demand is for six months, we multiply by 2 to annualize)
Substitute the values:
- Tags: Business operations, EOQ, Holding Cost
- Level: Level 1
- Topic: Operations Research
- Series: MAY 2017
- Uploader: Kwame Aikins