Question

Puppies and Rabbits, a soft toy manufacturing company requires 1250 units per month, of the soft toy named “COCO Rabbit”. The ordering cost is Rs 1000 per order. The cost of carrying inventory is 10% per annum. The cost of manufacturing one unit of COCO Rabbit is Rs 200

a. Determine the most economic lot size

b. The minimum total variable cost for the economic lot size
(please help me with this question)

Answer 1

Answer:

could not understand sorry

Answer 2

a) Economic Lot size should be 1,224.74

b) Total Minimum Variable cost for EOQ should be Rs.25,494.8

Explanation:

We have the following information available with us,

Annual demand(A) = $1250\times 12$ = 15,000 units

Ordering cost per order(O) = Rs.1,000

Carrying Cost per annum(C) = $10\% \times 200$ = Rs.20

a)Economic Order Quantity(EOQ) or Economic Lot size

EOQ = $\sqrt{} 2 \times A\times O \times \dfrac{1}{\sqrt{}C }$

           =  $\sqrt{}2\times1250\times1000 \times \dfrac{1}{\sqrt{} 20}$

            = 1,224.74 units

Therefore,the Economic lot size should be 1,224.74 units.

b)Calculation of Total minimum Variable cost of the Economic Lot size

Total Variable cost = Ordering cost of EOQ + Carrying cost of EOQ

Total Variable Cost = Rs.1,000 + $20 \times 1224.74$

                                 = Rs.25.494.8