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Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.?
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Find out the economic order quantity for raw materials and packing mat...
Economic Order Quantity Calculation
- Raw Material Ordering Cost: Rs. 1000 per order
- Packing Material Ordering Cost: Rs. 5000 per order
- Raw Material Holding Cost: 1 paise per unit per month
- Packing Material Holding Cost: 5 paise per unit per month
- Production: 200000 units per month
Formula for Economic Order Quantity (EOQ)
- EOQ = √((2 x Annual demand x Ordering cost per order) / Holding cost per unit)
Calculation for Raw Material
- Annual demand = Production x 12 = 200000 x 12 = 2400000 units
- EOQ = √((2 x 2400000 x 1000) / (0.01)) = 4898 units
Calculation for Packing Material
- Annual demand = Production x 12 = 200000 x 12 = 2400000 units
- EOQ = √((2 x 2400000 x 5000) / (0.05)) = 4898 units
Explanation
The economic order quantity (EOQ) is a formula used to determine the optimal order size that minimizes the total inventory costs. In this case, we have calculated the EOQ for raw materials and packing materials separately. The ordering cost per order and holding cost per unit are given for both materials. The annual demand is calculated by multiplying the monthly production by 12. Finally, we have used the EOQ formula to calculate the optimal order size for both materials. By using this method, the company can reduce the inventory holding cost and ordering cost and save money.
Community Answer
Find out the economic order quantity for raw materials and packing mat...
In ordering cost,
EOQ= √2CO/I
where, EOQ= quantity to be ordered
C. = annual consumption of material in units
or
carrying cost
O. = cost of placing 1 order including cost of
receiving goods
or
order cost
I. = interest payments including cost of shortage
per unit per year
or
inventory cost
here we need to find the economic order quantity for raw materials and packing materials
1. For raw materials..
C = 200000 units per month
O = 1000rs. per order
I = 1 paisa per unit per month,(1/100=0.01)
then,,, EOQ=√2CO/I
= √2×200000×1000/0.01
= 200000 units per order
2. For packing materials...
C = 200000 units per month
O = 5000rs.per order
I = 5 paisa per unit per month,(5/100=0.05)
then,,, EOQ=√2CO/I
= √2×200000×5000/0.05
= 200000 units per order
so for both the materials the economic order quantity is 200000 units .
EOQ= √2CO/I
where, EOQ= quantity to be ordered
C. = annual consumption of material in units
or
carrying cost
O. = cost of placing 1 order including cost of
receiving goods
or
order cost
I. = interest payments including cost of shortage
per unit per year
or
inventory cost
here we need to find the economic order quantity for raw materials and packing materials
1. For raw materials..
C = 200000 units per month
O = 1000rs. per order
I = 1 paisa per unit per month,(1/100=0.01)
then,,, EOQ=√2CO/I
= √2×200000×1000/0.01
= 200000 units per order
2. For packing materials...
C = 200000 units per month
O = 5000rs.per order
I = 5 paisa per unit per month,(5/100=0.05)
then,,, EOQ=√2CO/I
= √2×200000×5000/0.05
= 200000 units per order
so for both the materials the economic order quantity is 200000 units .
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Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.?
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Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.? 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 Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.?.
Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.? 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 Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find out the economic order quantity for raw materials and packing material from the following particulars. 1.Cost of ordaring Raw material.1000 per order. Packing material.5000 per order. 2 cost of holding inventory Raw material1 paise pr unit p.m. Packing material 5 paise pr unit p.m. 3. Production 200000 units p.m.?.
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