Fewpal
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A firm has an annual demand of 3000 units of raw materials. The setup cost is Rs. 25 per order and holding cost is Rs. 2 per unit/year. Determine 

1. optimal order quantity 

2. number of order per year 

3. Annual average inventory cost.

1 Answer

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Best answer

Given: R = 3000, C3 = Rs. 25/order ; C1 = Rs. 2 per unit/year. 

Here shortage cost C2 is not given use EOQ model 

1.EOQ : Optimal order Quantity = Q° 

= 273.86 

= 274 units

2. Number of orders n°

Here t° = Q°/R = Q°/R

n° = 10.95 = 11 orders per year

3. Annual average inventory cost. C (Q°) 

 

= Rs. 547.72/year

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