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Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.?
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Average monthly market demand. 2000 tubes Ordering cost. ₹100 per orde...
Introduction
The following is an analysis of the economic order quantity for a company that has an average monthly market demand of 2000 tubes, with an ordering cost of ₹100 per order, inventory carrying cost of 20% per annum, and a cost per tube of ₹500. The normal usage is 100 tubes per week, minimum usage is 50 tubes per week, maximum usage is 200 tubes per week, and the lead time to supply is 6-8 weeks.
Economic Order Quantity
The Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total cost of ordering and holding inventory. The formula for calculating EOQ is as follows:
EOQ = √((2DS)/H)
Where D is the annual demand, S is the ordering cost, and H is the inventory carrying cost.
Calculation
Annual demand = 2000 x 12 = 24000 tubes
Average weekly demand = 2000 / 4 = 500 tubes
Minimum weekly demand = 50 tubes
Maximum weekly demand = 200 tubes
Lead time demand = 500 x 8 = 4000 tubes
Total demand during lead time = 4000 x 2 = 8000 tubes
Total demand for the year = 24000 + 8000 = 32000 tubes
Ordering cost = ₹100 per order
Inventory carrying cost = 20% per annum
Cost per tube = ₹500
EOQ = √((2 x 32000 x 100)/20) = 800
Analysis
The company should accept the supplier's offer of supplying 1500 units quarterly at a discount of 5%.
The company's current EOQ is 800 tubes, which means that it needs to order 800 tubes each time to minimize the total cost of ordering and holding inventory. However, if the supplier is willing to supply 1500 units quarterly, the company can order 375 tubes per week, which is within the range of normal usage.
At a discount of 5%, the cost per tube would be ₹475, which is lower than the current cost of ₹500 per tube. Therefore, accepting the supplier's offer would result in cost savings for the company.
Conclusion
In conclusion, the economic order quantity for the company is 800 tubes. However, accepting the supplier's offer of supplying 1500 units quarterly at a discount of 5% is worth it as it would result in cost savings for the company.
The following is an analysis of the economic order quantity for a company that has an average monthly market demand of 2000 tubes, with an ordering cost of ₹100 per order, inventory carrying cost of 20% per annum, and a cost per tube of ₹500. The normal usage is 100 tubes per week, minimum usage is 50 tubes per week, maximum usage is 200 tubes per week, and the lead time to supply is 6-8 weeks.
Economic Order Quantity
The Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total cost of ordering and holding inventory. The formula for calculating EOQ is as follows:
EOQ = √((2DS)/H)
Where D is the annual demand, S is the ordering cost, and H is the inventory carrying cost.
Calculation
Annual demand = 2000 x 12 = 24000 tubes
Average weekly demand = 2000 / 4 = 500 tubes
Minimum weekly demand = 50 tubes
Maximum weekly demand = 200 tubes
Lead time demand = 500 x 8 = 4000 tubes
Total demand during lead time = 4000 x 2 = 8000 tubes
Total demand for the year = 24000 + 8000 = 32000 tubes
Ordering cost = ₹100 per order
Inventory carrying cost = 20% per annum
Cost per tube = ₹500
EOQ = √((2 x 32000 x 100)/20) = 800
Analysis
The company should accept the supplier's offer of supplying 1500 units quarterly at a discount of 5%.
The company's current EOQ is 800 tubes, which means that it needs to order 800 tubes each time to minimize the total cost of ordering and holding inventory. However, if the supplier is willing to supply 1500 units quarterly, the company can order 375 tubes per week, which is within the range of normal usage.
At a discount of 5%, the cost per tube would be ₹475, which is lower than the current cost of ₹500 per tube. Therefore, accepting the supplier's offer would result in cost savings for the company.
Conclusion
In conclusion, the economic order quantity for the company is 800 tubes. However, accepting the supplier's offer of supplying 1500 units quarterly at a discount of 5% is worth it as it would result in cost savings for the company.
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Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.?
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Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.?.
Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Average monthly market demand. 2000 tubes Ordering cost. ₹100 per order Inventory carrying cost. 20 %per annum Cost per tube. ₹500 Normal usage. 100 tubes per week Minimum usage. 50 tubes per week Maximum usage 200 tubes per week Lead time to supply. 6-8 weeks Economic order quantity. If the supplier is willing to supply 1500 units quarterly at a discount of 5% is it worth accepting.?.
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