Answer:
The economic order quantity is 98.
Explanation:
The economic order quantity (EOQ) can be described as the order quantity which results in the minimum the total holding costs and ordering costs.
Economic order quantity using the following formula:
[tex]EOQ = \sqrt{\frac{2 * D * S}{C} }[/tex] ...................... (1)
Where;
EOQ = economic order quantity = ?
D = Annual demand = 600
S = Ordering cost = $400
C = Carrying cost = $50
Substituting the values into equation (1), we have:
[tex]EOQ = \sqrt{\frac{2*600* 400}{50} }[/tex]
[tex]EOQ = \sqrt{\frac{480,000}{50} }[/tex]
[tex]EOQ = \sqrt{9,600}[/tex]
EOQ = 97.9795897113271
Approximating to a whole number, we have:
EOQ = 98
Therefore, the economic order quantity is 98.
