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Economic Order Quantity for a Product

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A large distributor of oil-well drilling equipment operated over the past 2 years with EOQ policies bases on an annual holding cost rate of 22%. under the EOQ policy, a particular product has been ordered with a Q*=80. A recent eval of holding costs shows that because of an increase in the interest rate associated with bank loans, the annual holding cost should be 27%.

a. what is the new economic order quantity for the product?
b. develop a general expression showing how the economic order quantity changes when annual holding cost rate is changed from I to I'.

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Solution Summary

Economic order quantity for a product is determined for oil-well drilling equipment.

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A large distributor of oil-well drilling equipment operated over the past 2 years with EOQ policies bases on an annual holding cost rate ...

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