Question

If the EOQ is 400 units, the ordering cost is 0.20, the carrying cost 20, how many orders are placed per year?
(a) 1
(b) 5
(c) 2
(d) 4​

Answer 1

Answer:

If you ordering cost is 0 ,20, carrying 20, (d) 4

Answer 2

The correct question: If the EOQ is 400 units, the ordering cost is 0.20, the carrying cost 20, how many orders are placed per year?

The correct answer is 8,000,000.

Given:

Economic order quantity (EOQ) = 400 units.

Ordering cost/Setup cost = 0.20

Carrying cost/holding cost = 20.

To Find:

Using the given data, we have to find out the number of orders placed per year or demand rate.

Solution:

The equation to find Economic order quantity (EOQ) is given by,

$EOQ = \sqrt{\frac{2. Ordering Cost.Demand Rate }{Carrying Cost} }$

On rearranging this equation, we get,

$Demand Rate = \frac{Carrying Cost . (EOQ)^2}{2. Ordering Cost}$

Substituting the given values in above equation, we get,

$Demand Rate = \frac{20 . (400)^2}{2. (0.20)} = 8, 000, 000.$

• The order quantity that minimizes the overall holding costs and ordering expenses in inventory management is referred to as the economic order quantity or economic purchase quantity.
• The overall cost of keeping inventory is referred to as the carrying cost or holding cost.
• The demand rate is the number of units that are sold in a year.
• Ordering cost or setup cost is the expenses related to setting up the machinery to produce the goods.

Hence, the number of orders placed per year is 8,000,000.

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