Question

annual demand for an item of an material is 3200 units, the cost per unit is rs 6 and inventory carrying charges are 25% p.a. if the cost of one odering is rs 150 find # EOQ, #no of orders per year, # time between two consecutive order?​

Answer 1

Answer:

EOQ = Economic Order Quantity(Q)

EOQ = √2×RU×OC / UC×CC%

RU = Annual demand

OC = Ordering cost per one unit

UC = Inventory unit cost

CC = Carrying cost as % of unit cost

➨ EOQ:

EOQ = √2×RU×OC / UC×CC%

√2×3,200×150 / 6×0.25

√6,40,000 = 800

EOQ = 800 units

➨ No of orders per year:

Annual demand/EOQ

3,200/800 = 4

No of orders per year: 4 orders per year

➨ Time between two consecutive order:

EOQ/Annual demand×Time

800/3,200×12 = 3 months

Time between two consecutive order: 3 months

Answer 2

Answer:

EOQ (Economic Order Quantity) = 800 units

No of orders per year = 4 orders per year

Time between two consecutive order = 3 months

Explanation:

Given :

• Annual demand (D) = 3,200 units

• Cost of one order (S) = Rs. 150

• Cost per unit (C) = Rs. 6

• Holding Cost in % (I) = 25%

• Holding Cost in Rs. (H) = I × C

To find :

• Calculate EOQ (Economic Order Quantity) = Q

• No of orders per year

• Time between two consecutive order

Solution :

Holding Cost (H) = I × C

$\longrightarrow{\sf{6 \times \dfrac{25}{100}}}$

$\longrightarrow \:  1.5$

• Holding Cost (H) = 1.5

★ EOQ :

$\sf{\longrightarrow{Q={\sqrt{ \dfrac{2SD}{H}}}}}$

$\sf{\longrightarrow{Q={\sqrt{ \dfrac{2 \: \times \: 150 \: \times \: 3,200 }{1.5}}}}}$

$\sf{\longrightarrow{Q={\sqrt{\dfrac{9,60,000}{1.5}}}}}$

$\sf{\longrightarrow{Q={\sqrt{6,40,000}}}}$

$\longrightarrow$ Q = 800 units

EOQ (Economic Order Quantity) = 800 units

★ No of orders per year :

$\sf{\longrightarrow{\dfrac{Annual \: demand }{EOQ}}}$

$\sf{\longrightarrow{\dfrac{3200}{800} \: = \: 4}}$

No of orders per year = 4 orders per year

★ Time between two consecutive order :

$\sf{\longrightarrow{\dfrac{EOQ }{Annual \: demand} \times \: Time}}$

$\sf{\longrightarrow{\dfrac{800}{3200} \times \: 12 \: = \: 3}}$

Time between two consecutive order = 3 months

Therefore,

EOQ (Economic Order Quantity) = 800 units

No of orders per year = 4 orders per year

Time between two consecutive order = 3 months