Afarmer needs 500 vats of fertilizer a week during the summer. he has a barn that can hold plenty of vats which cost around $1 a week for storage & handling per vat. the ordering costs for a new order are $250 regardless of the order size. what is the eoq for this farmer during the summer months?

Explanation:

Where:

D = annual demand

S= supply cost = ordering cost

H= annual Holding Cost

We are asked for summer, so we work with a 3 months period

D = 500 * 12 weeks of summer = 6,000

S = 250

H= $1 x 12 weeks of summer = $12

How to Remember:

Demand per year and order cost goes in the dividend.  

Holding cost goes in the divisor.  

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