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In the basic EOQ model, if demand is ₹60 per month, ordering cost is ₹12 per order, holding cost is ₹10 per unit per month, what is the EOQ?
- a)12
- b)144
- c)24
- d)28
Correct answer is option 'A'. Can you explain this answer?
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In the basic EOQ model, if demand is ₹60 per month, ordering cos...
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In the basic EOQ model, if demand is ₹60 per month, ordering cos...
Calculation of EOQ:
EOQ = √((2DS)/H)
Where,
D = demand per month = 60
S = order cost = 12
H = holding cost per unit per month = 10
Substituting the values in the above formula, we get:
EOQ = √((2*60*12)/10)
EOQ = √(144*12)
EOQ = √1728
EOQ = 12
Therefore, the EOQ is 12.
Explanation:
EOQ, or Economic Order Quantity, is the optimal order quantity that minimizes total ordering and holding costs. In the given problem, we are given the demand per month, ordering cost, and holding cost per unit per month. Using these values, we can calculate the EOQ using the formula √((2DS)/H).
Substituting the given values in the formula, we get the EOQ as 12. This means that if the company orders 12 units at a time, it would minimize the total ordering and holding costs. Ordering more than 12 units would increase the holding cost, while ordering less than 12 units would increase the ordering cost.
Therefore, the company should order 12 units at a time to minimize the total cost of inventory management.
EOQ = √((2DS)/H)
Where,
D = demand per month = 60
S = order cost = 12
H = holding cost per unit per month = 10
Substituting the values in the above formula, we get:
EOQ = √((2*60*12)/10)
EOQ = √(144*12)
EOQ = √1728
EOQ = 12
Therefore, the EOQ is 12.
Explanation:
EOQ, or Economic Order Quantity, is the optimal order quantity that minimizes total ordering and holding costs. In the given problem, we are given the demand per month, ordering cost, and holding cost per unit per month. Using these values, we can calculate the EOQ using the formula √((2DS)/H).
Substituting the given values in the formula, we get the EOQ as 12. This means that if the company orders 12 units at a time, it would minimize the total ordering and holding costs. Ordering more than 12 units would increase the holding cost, while ordering less than 12 units would increase the ordering cost.
Therefore, the company should order 12 units at a time to minimize the total cost of inventory management.
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