Question

Annual requirement of a particular item of stock is 10000 units. Carrying cost per unit per year is 20% and ordering cost is `40 per order. The price quoted by the supplier is `4 per unit. But the seller is is willing to give a discount of 5% for orders of 1500 units or more. Calculate EOQ. Suggest if the offer could be availed?
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Answer 1

Since the EOQ is 1,000 units, it does not meet the requirement for the discount. Therefore, the offer cannot be availed for the EOQ quantity.

Explanation:

To calculate the Economic Order Quantity (EOQ), we can use the formula:

EOQ = √((2 * Annual Demand * Ordering Cost) / Carrying Cost per Unit per Year)

Given:

Annual Demand = 10,000 units

Ordering Cost = ₹40 per order

Carrying Cost per Unit per Year = 20% of ₹4 = ₹0.80

Plugging in the values, we have:

EOQ = $\sqrt{\frac{(2 * 10,000 * 40) }{0.80} }$

= $\sqrt{\frac{800000}{0.80} }$

= $\sqrt{1000000}$

= 1,000 units

The EOQ is 1,000 units.

Now, let's consider the discount offer. The offer is a 5% discount for orders of 1,500 units or more. Since the EOQ is 1,000 units, it does not meet the requirement for the discount. Therefore, the offer cannot be availed for the EOQ quantity.

For more such questions on EOQ:

https://brainly.in/question/10184882

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