Tom Bergman, owner and operator of the Earplug Superstore, is reviewing the cost
ID: 456983 • Letter: T
Question
Tom Bergman, owner and operator of the Earplug Superstore, is reviewing the costs associated with the store's bestminus selling hearing aid, the BZ15. The data available to Mr. Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. Use the information in the scenario above. If Tom orders at the economic order quantity, how many units does he order at a time? A. Greater than 75 but less than or equal to 150 units B. Greater than 150 but less than or equal to 250 units C. Less than or equal to 75 units D. Greater than 250 units
Explanation / Answer
EOQ = SQRT(2 × Quantity/year × Cost Per Order / Carrying Cost Per Order)
EOQ = SQRT(2 × 25x52 × 3 / 1.5) = 72.111 units
hence ans. is C. Less than or equal to 75 units