Question

A local tyre distributor expects to sell approximately 9600 steel belted radial tyres next year. Annual carrying cost is Rs. 16 per tyre and ordering cost is Rs. 75. The economic order quantity of the tyres is

• A. 300
• B. 64
• C. 1200
• D. 212

Answer 1

The correct option is A 300

$\text{Demand, D = 9600}$

$\text{Carrying cost,}{C}_h=Rs.16/\text{year}$

$\text{Ordering cost,}{C}_0=Rs.75\text{/order}$

$EOQ,Q^{\ast }=\sqrt{\frac{2D{C}_0}{C_h}}=\sqrt{\frac{2\times 9600\times 75}{16}}$

$Q^{\ast }=\sqrt{1200\times 75}=300\text{tyres}$