i

. What is the economic order quantity for the following inventory policy: A firm sells 32,000 bags of premium sugar
per year. The cost per order is P200 and the firm experiences a carrying cost of P0.80 per bag.
A. 2,000 bags C. 8,000 bags
B. 4,000 bags D. 16,000 bags

Annual demand
ii
. Marsman Co. has determined the following for a given year:
Economic order quantity (standard order size) 5,000 units
Total cost to place purchase orders for the year P40,000
Cost to place one purchase order P 100
Cost to carry one unit for one year P 4
What is Marsmans estimated annual usage in units?
A. 1,000,000 C. 500,000
B. 2,000,000 D. 1,500,000



i
. Answer: B
EOQ = (2 x 32,000 x 20 0.8)^1/2 = 4,000 bags

ii
. Answer: B
Number of orders made 40,000/100 400
Annual requirement 400 x 5,000 2,000,000