A manufacturing enterprise monthly consumes 1,350 units of raw material at the cost of Rs. 20 per unit.…
Given monthly consumption of 1,350 units, annual demand (A) = 1,350 * 12 = 16,200 units; ordering cost per order (O) = Rs. 2,400; and carrying cost per unit per annum (C) =…
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A manufacturing enterprise monthly consumes 1,350 units of raw material at the cost of Rs. 20 per unit. Determine its economic order quantity given the ordering cost of Rs. 2,400 and carrying cost of inventory being 30 percent of the price paid.
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Correct answer A
Given monthly consumption of 1,350 units, annual demand (A) = 1,350 * 12 = 16,200 units; ordering cost per order (O) = Rs. 2,400; and carrying cost per unit per annum (C) = 30% of Rs. 20 = Rs. 6. Using the Economic Order Quantity formula EOQ = sqrt((2 * A * O) / C) = sqrt((2 * 16,200 * 2,400) / 6) = sqrt(1,29,60,000) = 3,600 units.
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UGC NET Commerce