ExpertMedium2 marksShort Answer
ACCA · Question 13 · Syllabus C: Cost accounting techniques
A specialized medical device manufacturer requires 18,000 microchips per year. The cost to place a single order is $200. The holding cost per microchip per year is $5.
Calculate the Economic Order Quantity (EOQ). (Enter number only, no commas or symbols)
A specialized medical device manufacturer requires 18,000 microchips per year. The cost to place a single order is $200. The holding cost per microchip per year is $5.
Calculate the Economic Order Quantity (EOQ). (Enter number only, no commas or symbols)
How to approach this question
Use the EOQ formula: √((2 × Co × D) / Ch), where Co is order cost, D is annual demand, and Ch is holding cost per unit.
Full Answer
EOQ = √((2 × Co × D) / Ch)
EOQ = √((2 × 200 × 18,000) / 5)
EOQ = √(7,200,000 / 5)
EOQ = √1,440,000
EOQ = 1,200 units.
Common mistakes
Forgetting to take the square root at the end of the calculation.
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