Consider the following data Annual usage = 12,000 units, carrying cost is given as 10% of the unit cost. The cost of an item is Rs. 100. The ordering cost per order is given as Rs. 60 Due to some technical reasons the supply is restricted to only 350 units. Find the total annual cost.a) order 500 units of pens whenever inventory level drops to 240 unitsb) order 500 units of pens whenever inventory level drops to 100 unitsc) order 1000 units of pens whenever inventory level drops to 240 unitsd) order 1000 units of pens whenever inventory level drops to 100 unitse) 1203800Correct answer is between ' order 500 units of pens whenever inventory level drops to 240 units, order 500 units of pens whenever inventory level drops to 100 units'. Can you explain this answer?

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a)
order 500 units of pens whenever inventory level drops to 240 units
b)
order 500 units of pens whenever inventory level drops to 100 units
c)
order 1000 units of pens whenever inventory level drops to 240 units
d)
order 1000 units of pens whenever inventory level drops to 100 units
e)
1203800

Correct answer is between ' order 500 units of pens whenever inventory level drops to 240 units, order 500 units of pens whenever inventory level drops to 100 units'. Can you explain this answer?

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Verified Answer

Consider the following data Annual usage = 12,000 units, carrying cos...

Given,

D = 12,000 units

C_C = 10% × 100 = Rs. 10/unit/year

C_o = Rs. 60/order

Supply is restricted to 350 units

EOQ = 380 which is greater than 350 So, find total cost at 350

= Rs. 12,03,807

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Most Upvoted Answer

Consider the following data Annual usage = 12,000 units, carrying cos...

Given,

D = 12,000 units

C_C = 10% × 100 = Rs. 10/unit/year

C_o = Rs. 60/order

Supply is restricted to 350 units

EOQ = 380 which is greater than 350 So, find total cost at 350

= Rs. 12,03,807

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Community Answer

Consider the following data Annual usage = 12,000 units, carrying cos...

Total annual cost can be calculated by considering the ordering cost, carrying cost, and the cost of the items.

Given data:
- Annual usage = 12,000 units
- Carrying cost = 10% of the unit cost
- Cost of an item = Rs. 100
- Ordering cost per order = Rs. 60
- Supply restricted to only 350 units

To find the total annual cost, we need to consider the ordering strategy and calculate the total cost for each option.

a) Order 500 units of pens whenever inventory level drops to 240 units:
- Number of orders = 12,000 / (500 - 240) = 46.15 (approx.)
- Total ordering cost = Number of orders * Ordering cost per order = 46.15 * Rs. 60 = Rs. 2,769
- Carrying cost = Annual usage * Carrying cost per unit = 12,000 * (10% * Rs. 100) = Rs. 12,000
- Total cost = Total ordering cost + Carrying cost + Cost of items = Rs. 2,769 + Rs. 12,000 + (12,000 * Rs. 100) = Rs. 1,450,769

b) Order 500 units of pens whenever inventory level drops to 100 units:
- Number of orders = 12,000 / (500 - 100) = 30 (approx.)
- Total ordering cost = Number of orders * Ordering cost per order = 30 * Rs. 60 = Rs. 1,800
- Carrying cost = Annual usage * Carrying cost per unit = 12,000 * (10% * Rs. 100) = Rs. 12,000
- Total cost = Total ordering cost + Carrying cost + Cost of items = Rs. 1,800 + Rs. 12,000 + (12,000 * Rs. 100) = Rs. 1,450,800

Comparing the total costs of options a) and b), we can see that both options have the same total cost of Rs. 1,450,800. Therefore, the correct answer is between "order 500 units of pens whenever inventory level drops to 240 units" and "order 500 units of pens whenever inventory level drops to 100 units".

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Consider the following data Annual usage = 12,000 units, carrying cost is given as 10% of the unit cost. The cost of an item is Rs. 100. The ordering cost per order is given as Rs. 60 Due to some technical reasons the supply is restricted to only 350 units. Find the total annual cost.a) order 500 units of pens whenever inventory level drops to 240 unitsb) order 500 units of pens whenever inventory level drops to 100 unitsc) order 1000 units of pens whenever inventory level drops to 240 unitsd) order 1000 units of pens whenever inventory level drops to 100 unitse) 1203800Correct answer is between ' order 500 units of pens whenever inventory level drops to 240 units, order 500 units of pens whenever inventory level drops to 100 units'. Can you explain this answer?

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