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Economic Order Quantity

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ABC Corp. uses 20,000 half inch PVC tubes during a calendar quarter. Ordering costs are $180 per order and carrying costs are $6 per tube per quarter. The economic order quantity is?

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The solution shows calculation of Economic Order Quantity.

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The economic order quantity (EOQ) is given by following formula

EOQ = Square root of (2*Annual demand*Ordering cost/Annual inventory carrying cost per unit

In the above example demand is given per quarter and inventory carrying cost is given as per tube per ...

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