EOQ EXERCISE

CHAPTER 5:

ECONOMIC
ORDER QUANTITY

(EOQ)

LEARNING OUTCOMES

By the end of the session, students should be able to:
• Memorize the formulas for Economic Order Quantity

(EOQ).
• Use a calculator for decimal calculations involving +, −, ×

and ÷, giving the answer to a specified accuracy.
• Check the answers to calculations by ensuring that the

correct calculation has been done, in the correct order.

DETAILS

FORMULAS

Exercise 1

Jaya Sdn Bhd operates 365 days a
year. The annual demand is 16,000
units, the ordering cost is RM50 and
the holding cost is RM2.50. The cost
of a unit of product is RM125. The
lead time is 2 days.

DETAILS FROM QUESTIONS

Cost per unit: RM125
D = 16000 units
S = RM50
H = RM2.50
OD = 365 days
L = 2 days

EOQ, Q:

• 2DS Formula = 0.5 mark
H

= 2 x 16000 x 50
Calculation = 0.5 mark
2.5

Answer = 0.5 mark = 800 units Unit = 0.5 mark

NO OF ORDER:

•D Formula = 0.5 mark
Calculation = 0.5 mark
Q
Unit = 0.5 mark
= 16000
800

Answer = 0.5 mark = 20 units

AVERAGE INVENTORY LEVEL:

•Q Formula = 0.5 mark
Calculation = 0.5 mark
2
Unit = 0.5 mark
= 800
2

Answer = 0.5 mark = 400 units

ANNUAL ORDERING COST

D xS Formula = 0.5 mark
Q

= 16000 x 50 Calculation = 0.5 mark
800

Unit = 0.5 mark = RM 1000 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2 Calculation = 0.5 mark
Answer = 0.5 mark
= 800 x 2.5
2

Unit = 0.5 mark = RM 1000

TOTAL COST

Q x H + x S 0.5 mark
2

= 800 x 2.5 + 16000 x 50 0.5 mark
2 800

0.5 mark = RM 2000 0.5 mark

REORDER POINT (ROP)

dxL

= D x L Formula = 0.5 mark
OD

= 16000 x 2 Calculation = 0.5 mark
365

Answer = 0.5 mark = 87.67 units/day Unit = 0.5 mark

Exercise 2

Maju Ltd. operates 300 days a year.
The annual demand is 292,410
units, the ordering cost is RM400
and the holding cost is estimated to
be 20% of a unit cost. The cost of a
unit of product is RM900. The lead
time is 3 days.

DETAILS FROM QUESTIONS

Cost per unit: RM900
D = 292,410 units
S = RM400
H = 20% of unit cost = RM180
OD = 300 days
L = 3 days

EOQ, Q:

• 2DS Formula = 0.5 mark
H

= 2 x 292,410x 400 Calculation = 0.5 mark
180

Answer = 0.5 mark = 1140 units Unit = 0.5 mark

NO OF ORDER:

•D Formula = 0.5 mark

Q

= 292410 Calculation = 0.5 mark
1140

= 256.50 unitsAnswer = 0.5 mark Unit = 0.5 mark

AVERAGE INVENTORY LEVEL:

•Q Formula = 0.5 mark
Calculation = 0.5 mark
2
Unit = 0.5 mark
= 1140
2

Answer = 0.5 mark = 570 units

ANNUAL ORDERING COST

D xS Formula = 0.5 mark
Q

= 292410 x 400 Calculation = 0.5 mark
1140

Unit = 0.5 mark = RM 102, 600.00 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2

= 1140 x 180 Calculation = 0.5 mark
2

Unit = 0.5 mark = RM 102, 600.00 Answer = 0.5 mark

TOTAL COST

Q x H + x S 0.5 mark
2

= 1140 x 180 + 292410 x 400 0.5 mark
2 1140

0.5 mark = RM 205,200.00 0.5 mark

REORDER POINT (ROP)

dxL

= D x L Formula = 0.5 mark
OD

= 292410 x 3 Calculation = 0.5 mark
300

Answer = 0.5 mark = 2924 units/day Unit = 0.5 mark

Exercise 3

Audra Trading sells mountain bike at $500
per unit. The annual demand is estimated
to be 1 800 units. The ordering cost is $40
per order, and the holding cost is $20 of
the unit cost per year. It operates 300
days per year. The lead time is 5 days.

Provide the solutions for following:

DETAILS FROM QUESTIONS

Cost per unit: $500
D = 1800 units
S = $40
H = $20
OD = 300 days
L = 5 days

EOQ, Q:

• 2DS Formula = 0.5 mark
H

= 2 x 1800 x 40 Calculation = 0.5 mark
20

Answer = 0.5 mark = 84.85 units Unit = 0.5 mark

NO OF ORDER:

•D Formula = 0.5 mark

Q

= 1800 Calculation = 0.5 mark
84.85

Answer = 0.5 mark = 21.21 units Unit = 0.5 mark

AVERAGE INVENTORY LEVEL:

•Q Formula = 0.5 mark

2

= 84.85 Calculation = 0.5 mark
2

Answer = 0.5 mark = 42.43 units Unit = 0.5 mark

ANNUAL ORDERING COST

D xS Formula = 0.5 mark
Q

= 1800 x 40 Calculation = 0.5 mark
84.85

Unit = 0.5 mark = $ 848.56 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2

= 84.85 x 20 Calculation = 0.5 mark
2

Unit = 0.5 mark = $ 848.50 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q x H + x S 0.5 mark
2

= 84.85 x 20 + 1800 x 40 0.5 mark
2 84.85

0.5 mark = $ 848.50 0.5 mark

REORDER POINT (ROP)

dxL

= D x L Formula = 0.5 mark
OD

= 1800 x 5 Calculation = 0.5 mark
300

Answer = 0.5 mark = 30 units/day Unit = 0.5 mark

Exercise 4

Gamma Sdn. Bhd.

Operating Days 300 days

Annual Demand 2 400 units

Ordering Cost RM 30

Holding Cost RM 8

Cost Per Unit RM 1 500

Lead Time 5 days

EOQ, Q:

• 2DS Formula = 0.5 mark
H

= 2 x 2400 x 30 Calculation = 0.5 mark
8

Answer = 0.5 mark = 134.16 units Unit = 0.5 mark

NO OF ORDER:

•D Formula = 0.5 mark

Q

= 2400 Calculation = 0.5 mark
134.16

Answer = 0.5 mark = 17.89 units Unit = 0.5 mark

AVERAGE INVENTORY LEVEL:

•Q Formula = 0.5 mark

2

= 134.16 Calculation = 0.5 mark
2

Answer = 0.5 mark = 67.08 units Unit = 0.5 mark

ANNUAL ORDERING COST

D xS Formula = 0.5 mark
Q

= x 302400 Calculation = 0.5 mark

134.16

Unit = 0.5 mark = RM 536.67 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2

= 134.16 x8 Calculation = 0.5 mark
2

Unit = 0.5 mark = RM 536.64 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2

= 134.16 x8 Calculation = 0.5 mark
2

Unit = 0.5 mark = RM 536.64 Answer = 0.5 mark

TOTAL COST

Q x H + x S 0.5 mark
2

= 134.16 x 8 + 2400 x 30 0.5 mark
2 134.16

0.5 mark = RM 1073.31 0.5 mark

REORDER POINT (ROP)

dxL

= D x L Formula = 0.5 mark
OD

= 2400 x 5 Calculation = 0.5 mark
300

Answer = 0.5 mark = 40 units/day Unit = 0.5 mark

Exercise 5 $15
1000 units
Cost per unit
Annual demand $10
$25
Carrying cost 365 days
Ordering cost 7 days
Operating days

Lead time

EOQ, Q:

• 2DS Formula = 0.5 mark
H

= 2 x 1000 x 25 Calculation = 0.5 mark
10

Answer = 0.5 mark = 70.71 units Unit = 0.5 mark

NO OF ORDER:

•D Formula = 0.5 mark

Q

= 1000 Calculation = 0.5 mark
70.71

Answer = 0.5 mark = 14.14 units Unit = 0.5 mark

AVERAGE INVENTORY LEVEL:

•Q Formula = 0.5 mark

2

= 70.71 Calculation = 0.5 mark
2

Answer = 0.5 mark = 35.36 units Unit = 0.5 mark

ANNUAL ORDERING COST

D xS Formula = 0.5 mark
Q

= 1000 x 25 Calculation = 0.5 mark
70.71

Unit = 0.5 mark = $ 353.56 Answer = 0.5 mark

ANNUAL HOLDING/CARRYING COST

Q xH Formula = 0.5 mark
2

= 70.71 x 10 Calculation = 0.5 mark
2

Unit = 0.5 mark = $ 353.55 Answer = 0.5 mark

TOTAL COST

Q x H + x S 0.5 mark
2

= 70.71 x 10 + 1000 x 20 0.5 mark
2 70.71

0.5 mark = RM 707.11 0.5 mark

REORDER POINT (ROP)

dxL

= D x L Formula = 0.5 mark
OD

= 1000 x 7 Calculation = 0.5 mark
365

Answer = 0.5 mark = 19.18 units/day Unit = 0.5 mark