# The annual demand for an item is 3000 units. Capital cost is Rs. 7 per unit. Inventory carrying cost is 20% of capital

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The annual demand for an item is 3000 units. Capital cost is Rs. 7 per unit. Inventory carrying cost is 20% of capital cost per annum. If set up cost is Rs. 150, determine

1. EOQ

2. Number of orders per year

3. Optimal cost

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Given R = 3000, p = 7,1 = 20% c3 = 150.

(Shortages are not given use EOQ model 1)

1. EOQ : Q° = $\sqrt\frac{2C_3R}{C_1}$

C1 = p1 = 7 × $\frac{20}{100}$

Q° = $\sqrt\frac{2\times 150 \times 300}{1.4}$

2. n° =$\frac{2R}{Q°}$ = $\frac{300}{801.78}$ = 3.4 orders

3. C(Q°) = $\sqrt{2\times 150 \times 300\times1.4}$

= Rs. 1122.50