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NECO 2023 · Paper 1 · Q50

The annual demand for a product is 12,500 units, the annual holding cost is ₦50.00 per unit and the cost of placing an order is ₦500.00. Find the number of orders per annum.

Worked solution (try it first)
  1. The economic order quantity is EOQ=2DCoCh\text{EOQ} = \sqrt{\dfrac{2DC_o}{C_h}}, with D=12 500D = 12\,500, Co=500C_o = 500 and Ch=50C_h = 50.
  2. EOQ=2×12 500×50050\text{EOQ} = \sqrt{\dfrac{2 \times 12\,500 \times 500}{50}}
    =250 000= \sqrt{250\,000}, which is 500 units.
  3. The number of orders a year is 12 500500=25\dfrac{12\,500}{500} = 25, option D.

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