Race One Motors is an Indonesian car manufacturer. At
its largest manufacturing facility, in Jakarta, the company produces
subcomponents at a rate of 300 per day, and it uses these subcompo�nents at a rate of 12,500 per year (of 250 working days). Holding costs
are $2 per item per year, and ordering (setup) costs are $30 per order.
To determine the Economic Order Quantity (EOQ) for Race One Motors, we can use the EOQ formula:
EOQ = sqrt((2 * D * S) / H)
Where:
D = Annual demand
S = Ordering (setup) cost per order
H = Holding cost per item per year
Given the information provided, we have:
D = 12,500 subcomponents per year
S = $30 per order
H = $2 per item per year
Substituting the values into the formula:
EOQ = sqrt((2 * 12,500 * 30) / 2)
Simplifying the equation:
EOQ = sqrt((375,000) / 2)
EOQ = sqrt(187,500)
Using a calculator, the square root of 187,500 is approximately 433.01.
Therefore, the Economic Order Quantity for Race One Motors is approximately 433 units.