Answer :
The economic order quantity (EOQ) is 712 units. If the holding cost doubles, the new EOQ is 504 units. If the holding cost drops in half, the new EOQ is 1008 units.
The EOQ is calculated using the following formula:
EOQ = √(2DS/H)
where:
D is the annual demand (in units)
S is the fixed cost per order (in dollars)
H is the holding cost per unit per year (in dollars)
In this case, we have:
D = 8,100 units
S = $47 per order
H = $1.50 per unit per year
Plugging these values into the formula, we get:
EOQ = √(2 * 8,100 * 47 / 1.50) = 712 units
If the holding cost doubles, the new EOQ will be half of the original EOQ, or 504 units. This is because the holding cost is a major factor in determining the EOQ. If the holding cost is doubled, the total holding cost will be doubled, which will cause the EOQ to be halved.
If the holding cost drops in half, the new EOQ will be twice the original EOQ, or 1008 units. This is because the holding cost is a major factor in determining the EOQ. If the holding cost is halved, the total holding cost will be halved, which will cause the EOQ to be doubled.
Original EOQ:
EOQ = √(2 * 8,100 * 47 / 1.50) = 712 units
EOQ if holding cost doubles:
EOQ = √(2 * 8,100 * 47 / (1.50 * 2)) = 504 units
EOQ if holding cost drops in half:
EOQ = √(2 * 8,100 * 47 / (1.50 / 2)) = 1008 units
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