Question

A particular item has a demand of 9000 units/year. The cost of one procurement is Rs.108 and holding cost per unit is Rs. 2.40/year. The replacement is instantaneous and no shortages are allowed. The optimum number of order/year is

• A. 8
• B. 2
• C. 6
• D. 10

Answer 1

The correct option is D 10

$\text{Annul demand (D) = 9000 units/year}$

$\text{Cost of procurement}\left(C_o\right)\text{= Rs.108}$

$\text{Holding cost}\left(C_c\right)\text{= 2.4 / unit / year}$

$\text{No.of orders (N) = ?}$

$N=\frac{D}{EOQ}$


$EOQ=\sqrt{\frac{2D{C}_o}{C_c}}$

$=\sqrt{\frac{2\times 9000\times 108}{2.4}}=900\text{units}$

$N=\frac{D}{EOQ}=\frac{9000}{900}=10\text{orders / year}$