Question

Iqbal runs an electrical shop in Lucknow. The most sold product in his shop is ceiling fans. The annual demand for fans is 32,000. The annual holding cost per unit is Rs.192. The cost incurred in placing an order is Rs.3000. Calculate the Economic Ordering Quantity of Ceiling fans.

Answer 1

Economic Ordering Quantity = √2/DP/C 

Where; 

2 is constant 

D = Annual demand 

P = cost of placing the order 

C = Inventory holding cost/ carrying cost

Thus as : annual demand(D)= 32,000 

 Order cost(P) = Rs. 3,000 

 Annual carrying cost of 1 unit(C) = Rs. 192

= 1000 Units