Question

A manufacturing company purchases lubricants at the rate of rs 42 per piece from a vendor. The requirement of these lubricants is 1800 per year.What should be the order quantity per orider if the cost per placement of an order is rs 16 and inventory carrying charges per rupee per year is only 20 paise???​

Answer 1

Answer:

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Answer 2

Given:

A manufacturing company purchases lubricants at the rate of Rs. 42 per piece from a vendor.

The requirement of these lubricants is 1800 per year.

To find:

What should be the order quantity per order if the cost per placement of an order is Rs. 16 and inventory carrying charges per rupee per year is only 20 paise???​

Solution:

To solve the above-given problem we will use the following formula:

$\boxed{\bold{Economic \:Order \:formula (EOQ) = \sqrt{\frac{2\times D\times S}{H} } }}$

Where:

D = Annual demand per unit  

S = ordering cost per purchse order  

H = Holding cost per unit

Here we have,

The annual requirement or demand (D) of the lubricants is,

= 1800 × Rs. 42

= Rs. 75600

The ordering cost per order (S) = Rs. 16

The holding cost per unit per year (H) = Rs. 0.20

Now, on substituting the given values in the formula of EOQ, we get

$EOQ = \sqrt{\frac{2\times 75600\times 16}{0.20}$

$\implies EOQ = \sqrt{\frac{2419200}{0.20}$

$\implies EOQ = \sqrt{12096000}$

$\implies EOQ = 3477.93$

$\implies \bold{EOQ}$ ≈ $\bold{3478 \:lubricants\:approximately}$

∴ The optimum inventory quantity is = $\frac{3478}{42} = 82.8$ ≈ $\bold{83\:lubricants}$

Thus, the order quantity per order should be approximately 83 lubricants.

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