17 Anil company buys its annual requirement of 36,000 units in 6 instalments. Each unit
costs 1 and the ordering cost is 25. The inventory carrying cost is estimated at 20% of
unit value. Find the total annual cost of the existing inventory policy. How much money
can be saved by Economic Ordering Quantity ?
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Answer:
Explanation:
As 36000 units in 12 months
Per month requirement = 36000/12= 3000 units
Economic order quantity ( EOQ)
EOQ = √ 2 * AR *OC / CC
=√ 2 * 36000 *25 / 1*20
=√ 2 * AR *OC / CC
= √90000
= 300 units
Number of orders = 6
But now = 3600 /300
= 12 number of orders
Ordering cost = 12 * 2= 300
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