Question

The net requirements of an item over 5 consecutive weeks are 50 - 0 - 15 - 20 - 20. The inventory carrying cost and ordering cost are Rs. 1 per item per week and Rs. 100 per order respectively. Starting inventory is zero. Use "Least Unit Cost Technique" for developing the plan. The cost of the plan (in Rs.) is

• A. 225
• B. 200
• C. 250
• D. 260

Answer 1

The correct option is C 250

D	Single order	Cost
50	105 - 50	100
0	55	55
15	55 - 15 = 40	55
20	40 - 20	40
20	20 - 20	20
		Total Cost

D	Double order	Cost
50	65 - 50 = 15	100
0	15	15
15	15 - 15 = 0	15 + 100
20	40 - 20	20
20	20 - 20 = 0	Total cost 250

Hence, cost of plan Rs. 250