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Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory?
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Calculate the economic order quantity. From the following information....
Calculation of Economic Order Quantity (EOQ):
EOQ formula = √((2 x Annual consumption x Order placing cost)/Annual storage cost per unit)
Given data:
Annual consumption = 1800 units
Order placing cost per order = ₹ 2
Cost per Kg. of raw material = ₹ 1 per unit
Storage cost = 8% on average inventory
Calculation:
Annual consumption in Kg. = 1800 units x 1 Kg. per unit = 1800 Kg.
Annual storage cost per unit = 8% x ₹ 1 = ₹ 0.08 per unit
EOQ = √((2 x 1800 x 2)/0.08)
EOQ = √(3600/0.08)
EOQ = √45000
EOQ = 212.13 units (approx.)
Therefore, the economic order quantity is 212.13 units (approx.)
Number of Orders to be Placed in a Year:
Number of orders = Annual consumption / EOQ
Number of orders = 1800 / 212.13
Number of orders = 8.48 (approx.)
Therefore, the number of orders to be placed in a year is 8 (approx.)
Explanation of Storage Cost:
Storage cost is the cost incurred for storing inventory in a warehouse or storage facility. It is usually calculated as a percentage of the average inventory value. In this case, the storage cost is 8% on the average inventory value.
For example, if the average inventory value is ₹ 10,000, then the storage cost would be 8% x ₹ 10,000 = ₹ 800. This cost includes expenses such as rent, utilities, insurance, and labor for maintaining and managing the inventory. Lowering the storage cost can help a business reduce its overall inventory cost and increase profitability.
EOQ formula = √((2 x Annual consumption x Order placing cost)/Annual storage cost per unit)
Given data:
Annual consumption = 1800 units
Order placing cost per order = ₹ 2
Cost per Kg. of raw material = ₹ 1 per unit
Storage cost = 8% on average inventory
Calculation:
Annual consumption in Kg. = 1800 units x 1 Kg. per unit = 1800 Kg.
Annual storage cost per unit = 8% x ₹ 1 = ₹ 0.08 per unit
EOQ = √((2 x 1800 x 2)/0.08)
EOQ = √(3600/0.08)
EOQ = √45000
EOQ = 212.13 units (approx.)
Therefore, the economic order quantity is 212.13 units (approx.)
Number of Orders to be Placed in a Year:
Number of orders = Annual consumption / EOQ
Number of orders = 1800 / 212.13
Number of orders = 8.48 (approx.)
Therefore, the number of orders to be placed in a year is 8 (approx.)
Explanation of Storage Cost:
Storage cost is the cost incurred for storing inventory in a warehouse or storage facility. It is usually calculated as a percentage of the average inventory value. In this case, the storage cost is 8% on the average inventory value.
For example, if the average inventory value is ₹ 10,000, then the storage cost would be 8% x ₹ 10,000 = ₹ 800. This cost includes expenses such as rent, utilities, insurance, and labor for maintaining and managing the inventory. Lowering the storage cost can help a business reduce its overall inventory cost and increase profitability.
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Calculate the economic order quantity. From the following information....
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Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory?
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Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? 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 Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory?.
Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? 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 Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory?.
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Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory?, a detailed solution for Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? has been provided alongside types of Calculate the economic order quantity. From the following information. Also state the number of orders to be placed in a year: Consumption of materials per annum = 1800 units Order placing costs per order = ₹ 2 Cost per Kg. Of raw materials = ₹ 1 per unit Storage cost = 8% on average inventory? theory, EduRev gives you an
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