Question

Question
Average Annual consumption of material is
20,000 kgs at a price of Rs. 2 per kg. The
holding ocst is 16% and ordering cost is Rs
50. How much should be EOQ?​

Answer 1

________
EOQ = /2 *a*o / c
a = annual demand of material that is 20000kg
O = ordering cost per Order
= 50
C =carrying cost per unit
= 2*16%
=0.32
________
EOQ = /2*20000*50/0.32
=2500 kg

Answer 2

EOQ = 2500 kg.

EOQ (economic order quantity )is the best quantity to be ordered in a year, after a particular gap so that the all related cost ( holding cost and ordering cost ) will remain minimum.

Average annual consumption = 20000 kg

Holding cost = 2*16% = ₹0.32

ordering cost = ₹50

EOQ = $\sqrt{2AO/C}$

        =$\sqrt{2*20000*50/0.32}$

        = 2500 kg.