You purchase lubricating oil in 55 gallon drums and consume and average of 484 drums per year. Preparing an order and receiving a shipment of lubricant costs $5.0 per order. Annual carrying costs are $76 per drum.

Determine the EOQ.

EOQ =  ≅ 8

Explanation:

EOQ = √(2SD)/H

   S = ordering cost per order = $5.0

   H= Holding cost = $76

D= Annual Demand = 484 drums

EOQ = √(2 x 5 x 484 )/76

        = √63.68

        7.98

This implies that the optimal quantity that can be ordered for to minimize ordering and carrying cost is 8 drums per order.

EOQ= 8 units.

Explanation:

Economic order quantity=   sqrt{2DS}/h

where Q= EOQ units

       D= demand in units

       S= Order cost (per purchase order)

        h= holding cost (per unit,per year)

h= Annual carrying cost: = 76 per drum

S=Ordering cost = $5 per order

D= Annual demand= 484 drums per year

Calculation: EOQ = sqrt{2* 484 * 5}/ 76

                            =sqrt(4840/76)

                           = 8 units

8 EOQ units where ordering cost and carrying are equal.

was my answer wrong?