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Economic Order Quantity (EOQ)

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A large distributor of oil-well drilling equipment operated over the past two years with EOQ policies based on an annual holding cost rate of 22%. Under the EOQ policy, a particular product has been ordered with a Q* = 80. a recent evaluation of holding costs shows that because of an increase in the interest rate associated with bank loans, the annual holding cost rate should be 27%.

What is the new economic order quantity for the product?

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Solution Summary

This posting provides details on calculating Economic Order Quantity (EOQ) for a large distributor of oil-well drilling equipment.

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