ACCA FM · Chapter 4 · Question 1 of 12
A company uses 48,000 units of a component each year. Each order costs $150 to place and it costs $2.40 to hold one unit in inventory for a year. What is the economic order quantity (EOQ), to the nearest unit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 2,449 units
Explanation
EOQ = square root of (2 x Co x D / Ch) = square root of (2 x 150 x 48,000 / 2.40) = square root of 6,000,000 = 2,449.5, which is 2,449 units to the nearest unit. Omitting the 2 gives 1,732 units, and forgetting to take the square root gives 6,000,000.
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