Question

The Annual requirement for a product is 3000 units. The ordering cost Rs.100/- per order. The
cost per unit is Rs. 10/-. The carrying cost per unit per year is 30% of the unit cost. Find the
EOQ value. If the ordering cost reduces to Rs. 80/- Per order what will be the EOQ. Compare
the total cost for both the cases.
1040


please elaborate ...
m not understanding​

Answer 1

Answer:

The annual demand for a product is 3000 units. 100 per order. The

Price per unit Rs. 10 / -. The carrying cost per unit is 30% of the unit cost. Find it

EOQ value. Ordering costs Rs. 80 / - per order. Compare

Total cost of both cases.

1040

Answer 2

The total inventory cost is lower in the second case when the ordering cost reduces to Rs. 80/- per order.

EOQ stands for Economic Order Quantity, which is the optimal order quantity that minimizes the total inventory cost of a product. The EOQ formula is as follows:

$EOQ = \sqrt{((2 * D * S) / H)}$

where,

D = Annual demand for the product

S = Ordering cost per order

H = Carrying cost per unit per year

In this problem, we are given the following values:

Annual demand (D) = 3000 units

Ordering cost (S) = Rs. 100/- per order

Cost per unit = Rs. 10/-

Carrying cost (H) = 30% of unit cost = 0.3 * Rs. 10/- = Rs. 3/-

Substituting these values in the EOQ formula, we get:

$EOQ = \sqrt{((2 * 3000 * 100) / 3)} \\EOQ = \sqrt{ (200000)}\\EOQ = 447.21$

Therefore, the EOQ value is 447 units.

Now, let's assume that the ordering cost reduces to Rs. 80/- per order. Substituting this value in the EOQ formula, we get:

$EOQ = \sqrt{((2 * 3000 * 80) / 3)} \\EOQ = \sqrt{(160000)} \\EOQ = 400 (approx.)$

Therefore, the EOQ value is 400 units when the ordering cost reduces to Rs. 80/- per order.

To compare the total cost for both cases, we need to calculate the total inventory cost for each case. The total inventory cost formula is as follows:

Total Inventory Cost = $(D/Q * S) + (Q/2 * H) + (D * unit cost)$

where,

Q = Order quantity

For the first case, we have:

Q = 447 units

Total Inventory Cost = $(3000/447 * 100) + (447/2 * 3) + (3000 * 10)$

Total Inventory Cost =$671.14 + 670.5 + 30000$

Total Inventory Cost = $Rs. 31341.64/-$

For the second case, we have:

Q = 400 units

Total Inventory Cost = $(3000/400 * 80) + (400/2 * 3) + (3000 * 10)$

Total Inventory Cost = $600 + 600 + 30000$

Total Inventory Cost = $Rs. 31200/-$

Therefore, the total inventory cost is lower in the second case when the ordering cost reduces to Rs. 80/- per order.

for such more question on EOQ value

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