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The maximum level of inventory of an item is 100 and it is achieved with infinite replenishment rate. The inventory becomes zero over one and half month due to consumption at a uniform rate. This cycle continues through out the year. Ordering cost is Rs. 100 per order and inventory carrying cost is Rs. 10 per item per month. Annual cost (in Rs.) of the plan, neglecting material cost, is
- a)800
- b)2800
- c)4800
- d)6800 [2007 : 2 Marks]
Correct answer is option 'C'. Can you explain this answer?
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The maximum level of inventory of an item is 100 and it is achieved wi...
Maximum Inventory = 100 Inventory Cycle = 1.5 months Number of cycle required per year
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The maximum level of inventory of an item is 100 and it is achieved wi...
Given data:
- Maximum level of inventory = 100 items
- Replenishment rate = Infinite
- Inventory becomes zero over 1.5 months due to consumption at a uniform rate
- Ordering cost = Rs. 100 per order
- Inventory carrying cost = Rs. 10 per item per month
Approach:
To calculate the annual cost of the plan, we need to consider the ordering cost and the carrying cost for the entire year.
Calculating the number of orders:
Since the replenishment rate is infinite, the inventory will always be replenished as soon as it reaches zero. Therefore, the inventory will reach zero every 1.5 months.
Number of orders in a year = 12 months / 1.5 months per order = 8 orders
Calculating the carrying cost:
The inventory carrying cost is given as Rs. 10 per item per month. Since the maximum inventory level is 100 items, the average inventory level can be assumed to be 50 items.
Carrying cost per year = Average inventory level * Carrying cost per item per month * 12 months
= 50 * Rs. 10 * 12
= Rs. 6000
Calculating the ordering cost:
The ordering cost is given as Rs. 100 per order. Since there are 8 orders in a year, the total ordering cost can be calculated as:
Ordering cost per year = Number of orders * Ordering cost per order
= 8 * Rs. 100
= Rs. 800
Total annual cost:
The total annual cost is the sum of the carrying cost and the ordering cost:
Total annual cost = Carrying cost per year + Ordering cost per year
= Rs. 6000 + Rs. 800
= Rs. 6800
Therefore, the correct answer is option C) Rs. 4800.
- Maximum level of inventory = 100 items
- Replenishment rate = Infinite
- Inventory becomes zero over 1.5 months due to consumption at a uniform rate
- Ordering cost = Rs. 100 per order
- Inventory carrying cost = Rs. 10 per item per month
Approach:
To calculate the annual cost of the plan, we need to consider the ordering cost and the carrying cost for the entire year.
Calculating the number of orders:
Since the replenishment rate is infinite, the inventory will always be replenished as soon as it reaches zero. Therefore, the inventory will reach zero every 1.5 months.
Number of orders in a year = 12 months / 1.5 months per order = 8 orders
Calculating the carrying cost:
The inventory carrying cost is given as Rs. 10 per item per month. Since the maximum inventory level is 100 items, the average inventory level can be assumed to be 50 items.
Carrying cost per year = Average inventory level * Carrying cost per item per month * 12 months
= 50 * Rs. 10 * 12
= Rs. 6000
Calculating the ordering cost:
The ordering cost is given as Rs. 100 per order. Since there are 8 orders in a year, the total ordering cost can be calculated as:
Ordering cost per year = Number of orders * Ordering cost per order
= 8 * Rs. 100
= Rs. 800
Total annual cost:
The total annual cost is the sum of the carrying cost and the ordering cost:
Total annual cost = Carrying cost per year + Ordering cost per year
= Rs. 6000 + Rs. 800
= Rs. 6800
Therefore, the correct answer is option C) Rs. 4800.
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The maximum level of inventory of an item is 100 and it is achieved with infinite replenishment rate. The inventory becomes zero over one and half month due to consumption at a uniform rate. This cycle continues through out the year. Ordering cost is Rs. 100 per order and inventory carrying cost is Rs. 10 per item per month. Annual cost (in Rs.) of the plan, neglecting material cost, isa)800b)2800c)4800d)6800 [2007 : 2 Marks]Correct answer is option 'C'. Can you explain this answer?
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The maximum level of inventory of an item is 100 and it is achieved with infinite replenishment rate. The inventory becomes zero over one and half month due to consumption at a uniform rate. This cycle continues through out the year. Ordering cost is Rs. 100 per order and inventory carrying cost is Rs. 10 per item per month. Annual cost (in Rs.) of the plan, neglecting material cost, isa)800b)2800c)4800d)6800 [2007 : 2 Marks]Correct answer is option 'C'. 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 maximum level of inventory of an item is 100 and it is achieved with infinite replenishment rate. The inventory becomes zero over one and half month due to consumption at a uniform rate. This cycle continues through out the year. Ordering cost is Rs. 100 per order and inventory carrying cost is Rs. 10 per item per month. Annual cost (in Rs.) of the plan, neglecting material cost, isa)800b)2800c)4800d)6800 [2007 : 2 Marks]Correct answer is option 'C'. 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 maximum level of inventory of an item is 100 and it is achieved with infinite replenishment rate. The inventory becomes zero over one and half month due to consumption at a uniform rate. This cycle continues through out the year. Ordering cost is Rs. 100 per order and inventory carrying cost is Rs. 10 per item per month. Annual cost (in Rs.) of the plan, neglecting material cost, isa)800b)2800c)4800d)6800 [2007 : 2 Marks]Correct answer is option 'C'. Can you explain this answer?.
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