A company makes bicycles. It produces 850 bicycles a month. It buys the tires for bicycles from a supplier at a cost of Rs.60 per tire. The company's inventory carrying cost is estimated to be 15% of cost and the ordering is Rs.90 per order. Calculate number of orders to be made per year.
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Answer:
639 approx.
Step-by-step explanation:
D=annual demand = 2×850×12=20400
(because each bicycle has 2 tires therefore 850 has been multiplied by 2)
ordering cost or setup cost (O)= ₹90 (given)
holding cost or carrying cost (H)= 15% of ₹60= ₹9
EOQ or Q = √(2DO) ÷ √H
therefore, Q= √(2×20400×90) ÷ √9
Q= 638.74 i.e., 639 tires
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