Question

Ans. : 800 units.
20. A manufacturer buys certain equipment from outside suppliers at P 30 per unit. Total annual need
are 800 units. The following further data are available :
Annual return on investment
10%
Rent, insurance, taxes per unit per year
1.00
Cost of placing an order
*100
Determine the Economic Order Quantity
Ans.: ECO - 200 units.​

Answer 1

Answer:

per unit. Total annual need

are 800 units. The following further data are available :

Annual return on investment

10%

Rent, insurance, taxes per unit per year

1.00

Answer 2

Economic order quantity

= (2^AYO/C (1/2)

= (2*800*100/4)^(1/2)

= 200 units

Where,

A = Annual demand of 800 Units

O = Ordering cost per order = ₹ 100.00

C = Carrying cost per unit = ₹ 4.00

Working:

Calculation of carrying cost per unit:

Rent, insurance etc.

the price per unit for every year = ₹ 1.00

Opportunity cost (30 *10%) = ₹ 3.00

Total carrying cost = ₹ 4.00

Opportunity cost is the benefit forgone from another alternative.

Here, here investor invests Rs. 30 in buying equipment.

The investor would earn 10% on such investment that is forgone for buying per unit

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