Question

From the following particulars, compute Economic Order Quantity: Annual consumption=8, 10, 000 units Order placing and receiving costs: Rs.10 per order Annual stock holding stock: 20% of consumption.


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Answer 1

Answer:

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Answer 2

Answer:

Economic order quantity (EOQ) is the order quantity of inventory that minimizes the total cost of inventory management. Two most important categories of inventory costs are ordering costs and carrying costs. Ordering costs are costs that are incurred on obtaining additional inventories. They include costs incurred on communicating the order, transportation cost, etc. Carrying costs represent the costs incurred on holding inventory in hand. They include the opportunity cost of money held up in inventories, storage costs, spoilage costs, etc. 

If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ =  $$sqrt[2AO}/{C}$$