If the demand of one year is 25000 units, relevant ordering cost for each purchase order is $210, carrying cost of one unit of stock is $25 then the economic order quantity will be ___________?
Correct answer: B. 648 packages
- A. 678 packages
- B. 648 packages
- C. 658 packages
- D. 668 packages
Explanation
Economic order quantity is √(2DS/H), where D = 25,000 units, S = $210 and H = $25: √(2 × 25,000 × 210 ÷ 25) ≈ 648 packages. Thus option b is the closest exact choice.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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