Mechanical Engineering Exam > Mechanical Engineering Questions > The annual demand of valves per year in a com...
Start Learning for Free
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).
Correct answer is '943.59'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
The annual demand of valves per year in a company is 10,000 units. The...
Annual Demand (D) = 10000 nos
Order Quantities (Q) = 400 / order
Holding cost (Ch)= 24 /valve/year
Ordering Cost (CO) = RS 400 /order
Order Quantities (Q) = 400 / order
Holding cost (Ch)= 24 /valve/year
Ordering Cost (CO) = RS 400 /order
Most Upvoted Answer
The annual demand of valves per year in a company is 10,000 units. The...
Given:
- Annual demand of valves = 10,000 units
- Current order quantity = 400 valves per order
- Holding cost = Rs. 24 per valve per year
- Ordering cost = Rs. 400 per order
To find:
- Savings in the total cost of inventory per year if the order quantity is changed to Economic Order Quantity (EOQ)
Solution:
1. Calculation of EOQ:
The Economic Order Quantity (EOQ) formula can be used to calculate the optimal order quantity that minimizes the total cost of inventory. The EOQ formula is given by:
EOQ = sqrt((2 * D * S) / H)
Where:
- D = Annual demand (10,000 units)
- S = Ordering cost per order (Rs. 400)
- H = Holding cost per unit per year (Rs. 24)
Substituting the given values into the formula, we can calculate the EOQ:
EOQ = sqrt((2 * 10,000 * 400) / 24)
= sqrt(833,333.33)
≈ 912.87
Therefore, the Economic Order Quantity is approximately 912.87 units.
2. Calculation of Total Cost of Inventory:
Total Cost of Inventory (TCI) is the sum of the ordering cost and the holding cost. The formula for TCI is given by:
TCI = (D / Q) * S + (Q / 2) * H
Where:
- Q = Order quantity
2.1. Current Order Quantity:
Using the current order quantity of 400 valves per order:
TCI_current = (10,000 / 400) * 400 + (400 / 2) * 24
= 10,000 + 4,800
= Rs. 14,800
2.2. Economic Order Quantity:
Using the Economic Order Quantity of approximately 912.87 units:
TCI_EOQ = (10,000 / 912.87) * 400 + (912.87 / 2) * 24
= 10,960.88 + 10,972.08
≈ Rs. 21,932.96
3. Calculation of Savings in Total Cost of Inventory:
Savings in Total Cost of Inventory can be calculated by subtracting the TCI_EOQ from the TCI_current:
Savings = TCI_current - TCI_EOQ
= Rs. 14,800 - Rs. 21,932.96
≈ Rs. -7,132.96
The negative value indicates that the current order quantity is more cost-effective than the Economic Order Quantity. However, since negative savings don't make sense, we can take the absolute value of the savings:
Absolute Savings = |Savings|
= |-7,132.96|
≈ Rs. 7,132.96
Therefore, the savings in the total cost of inventory per year, when changing the order quantity to the Economic Order Quantity, is approximately Rs. 7,132.96.
- Annual demand of valves = 10,000 units
- Current order quantity = 400 valves per order
- Holding cost = Rs. 24 per valve per year
- Ordering cost = Rs. 400 per order
To find:
- Savings in the total cost of inventory per year if the order quantity is changed to Economic Order Quantity (EOQ)
Solution:
1. Calculation of EOQ:
The Economic Order Quantity (EOQ) formula can be used to calculate the optimal order quantity that minimizes the total cost of inventory. The EOQ formula is given by:
EOQ = sqrt((2 * D * S) / H)
Where:
- D = Annual demand (10,000 units)
- S = Ordering cost per order (Rs. 400)
- H = Holding cost per unit per year (Rs. 24)
Substituting the given values into the formula, we can calculate the EOQ:
EOQ = sqrt((2 * 10,000 * 400) / 24)
= sqrt(833,333.33)
≈ 912.87
Therefore, the Economic Order Quantity is approximately 912.87 units.
2. Calculation of Total Cost of Inventory:
Total Cost of Inventory (TCI) is the sum of the ordering cost and the holding cost. The formula for TCI is given by:
TCI = (D / Q) * S + (Q / 2) * H
Where:
- Q = Order quantity
2.1. Current Order Quantity:
Using the current order quantity of 400 valves per order:
TCI_current = (10,000 / 400) * 400 + (400 / 2) * 24
= 10,000 + 4,800
= Rs. 14,800
2.2. Economic Order Quantity:
Using the Economic Order Quantity of approximately 912.87 units:
TCI_EOQ = (10,000 / 912.87) * 400 + (912.87 / 2) * 24
= 10,960.88 + 10,972.08
≈ Rs. 21,932.96
3. Calculation of Savings in Total Cost of Inventory:
Savings in Total Cost of Inventory can be calculated by subtracting the TCI_EOQ from the TCI_current:
Savings = TCI_current - TCI_EOQ
= Rs. 14,800 - Rs. 21,932.96
≈ Rs. -7,132.96
The negative value indicates that the current order quantity is more cost-effective than the Economic Order Quantity. However, since negative savings don't make sense, we can take the absolute value of the savings:
Absolute Savings = |Savings|
= |-7,132.96|
≈ Rs. 7,132.96
Therefore, the savings in the total cost of inventory per year, when changing the order quantity to the Economic Order Quantity, is approximately Rs. 7,132.96.
Attention Mechanical Engineering Students!
To make sure you are not studying endlessly, EduRev has designed Mechanical Engineering study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Mechanical Engineering.
|
Explore Courses for Mechanical Engineering exam
|
|
Similar Mechanical Engineering Doubts
Top Courses for Mechanical EngineeringView all
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer?
Question Description
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? for Mechanical Engineering 2024 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer?.
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? for Mechanical Engineering 2024 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer?.
Solutions for The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? in English & in Hindi are available as part of our courses for Mechanical Engineering.
Download more important topics, notes, lectures and mock test series for Mechanical Engineering Exam by signing up for free.
Here you can find the meaning of The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer?, a detailed solution for The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? has been provided alongside types of The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. __________ (round off to two decimal places).Correct answer is '943.59'. Can you explain this answer? tests, examples and also practice Mechanical Engineering tests.
|
|
Explore Courses for Mechanical Engineering exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup