Question

If annual demand is 24000 units, Set up cost per batch is Rs. 120 and annual carrying cost per unit is Rs. 0.36, Calculate Economiuc Batch Quantity, Number of Batches in a year, time gap between two batches and total cost.
a) 4000 units, 6 batches, 3 months, Rs. 1,440
b) 2000 units, 12 batches, 2 months, Rs. 1,440
c) 4000 units, 6 batches, 2 months, Rs. 1,440
d) 2400 units, 10 batches, 3 months, Rs. 1,400
e) 4000 units, 12 batches, 3 months, Rs. 1,400​

Answer 1

Answer:

4000

Explanation:

√2×24000×120/0.36

=4000

Answer 2

Answer:

Correct option is (a)

Explanation:

The process by which a company or business determines how much quantity should be produced in a specific batch for a given period of time is known as economic batch quantity(EBQ).

The annual demand for the product, $D=24000 units$

Setting up the cost per batch,$S= Rs120$

Carrying cost per unit cost of production, $C= Rs0.36/unit/annum$

(a) EBQ can be calculated as,

$EBQ=\sqrt{\frac{2DS}{C}}$

$EBQ=\sqrt{\frac{2*24000*120}{0.36} }\\EBQ=4000 units$

(b) Number of batches to be made for manufacturing the parts

$=\frac{24000}{4000} \\= 6 batches$

(c) Time gap between two batches = 3 months

(d) Ordering Cost = Number of batches x Set up cost per batch

Carrying Cost = $\frac{1}{2} *EBQ*C$

Total cost = Ordering cost + Carrying cost

$=(6*120)+\frac{1}{2} *4000*0.36\\=Rs.1440$

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