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Need help with a calculation regarding an economic order quantity calculation using Harris Andler's formula:
EOQ = x = √ (2 * D * S) / H
where:
D = annual demand in units S = order cost H = holding costs per unit and year
The following information is given:
- Sales volume is 36'500 loaves of bread/year
- each loaf requires 700 g of flour
- the flour is delivered in 25 kg sacks, costing 40 USD each
- for orders of 100 sacks or more, there is a 15% discount on sales price
- transport costs are 150 USD per delivery
- holding costs are 2 USD per sack and month
The textbook solution states, the EOQ is 114 sacks per order. I'm unable to arrive at 114.
My assumptions: - To me D is 1022 units as (((36500*700)/1000)/25). - To me S is either 40, 150, or 190. - H is 2 USD
No matter in which combination I insert the numbers, the result is never 114.
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