Question

When the annual demand of a product is 24000 units, the EOQ (Economic Order Quantity) is 2000 units. If the annual demand is 48000 units the most appropriate EOQ will be

• A. 2000 units
• B. 4000 units
• C. 1000 units
• D. 2800 units

Answer 1

The correct option is D 2800 units

Given that:

Annual demand, D = 24000 units

Economic order quantity, EOQ = 2000 units

Annual demand increases to 48000,

$\text{then, D' = 48000 = 2 × 24000 = 2D}$

Economic order quantity when demand is 48000,

$EO{Q}^{\prime }=\sqrt{2}EOQ=\sqrt{2}\times 2000$

$=2828.427\text{units}=2800\text{unit}$

$\text{Points to Remember}$

• Here, $EO{Q}^{\prime }=\sqrt{2}EOQ$ is taken because demand is increasing twicely to the previous demand.
• This problem is based on the same formula as problem 2.1