Question

The annual demand for an item is 10,000 units. The unit cost is Rs. 100 and inventory carrying charges are 14.4% of the unit cost per annum. The cost of one procurement is Rs. 2000. The time between two consecutive orders to meet the above demand is month(s).

• A. 2

Answer 1

The correct option is A 2
$EOQ,Q^{\ast }=\sqrt{\frac{2D{C}_0}{C_h}}$

$=\sqrt{\frac{2\times 10000\times 2000}{14.4}}=1666.67$

$\text{No. of orders per year}N=\frac{D}{Q^{\ast }}=\frac{10000}{1666.67}=6$

$\text{Time between two consecutive orders,}$

$=\frac{1}{N}\times 12=\frac{12}{6}\text{months}$

$\text{= 2 months}$