Question

What will be the EOQ when annual demand is worth 100000, if ordering costs is 1.5% of order value and carrying cost is 8% of average value of inventory?

• A. ₹ 62500
• B. 50000
• C. 37500
• D. 25000

Answer 1

The correct option is C 37500

$\text{Where, D = Total demand}$

$\text{C = Cost per unit}$

$C_h\text{= Holding cost}$

$C_0\text{= Ordering cost}$

$\text{Q = Quantity ordered at EOQ.}$

$\text{Given, Total worth = ₹100000}$

$D\times C=10000$

$C_0\text{= 1.5 \% of (Q}\times \text{C)}$

$C_h\text{= 8\% of C}$

$Q^{\ast }=\sqrt{\frac{2D{C}_0}{C_h}}=\sqrt{\frac{2\times \left(\frac{100000}{C}\right)\times 1.5\times Q^{\ast }\times C\times 100}{100\times 8\times C}}$

$=\sqrt{\frac{150000\times Q^{\ast }}{4\times C}}$

$(Q^{\ast }{)}^2=37500\times \frac{Q^{\ast }}{C}$

$(Q^{\ast }\times C)=37500$