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The net requirements of an item over 5 consecutive weeks are 50-0-15-20-20. The inventory carrying cost and ordering cost are Rs. 1 per item per week and Rs. 100 per order respectively. Starting inventory is zero. Use "Least Unit Cost Technique" for developing the plan. The cost of the plan (in Rs.) is
[2007]
  • a)
    200
  • b)
    250
  • c)
    225
  • d)
    260
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
The net requirements of an item over 5 consecutive weeks are 50-0-15-2...
Ch = 1 per unit per week
CO = 100/order
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Most Upvoted Answer
The net requirements of an item over 5 consecutive weeks are 50-0-15-2...
The Economic Order Quantity (EOQ) model to determine the optimal order quantity.

First, let's calculate the average demand for the 5 weeks:

Average demand = (50 + 0 + 15 + 20 + 20) / 5 = 21 units per week

Next, let's calculate the total annual demand:

Total annual demand = Average demand * 52 weeks = 21 * 52 = 1,092 units

Now, let's calculate the EOQ using the formula:

EOQ = √(2 * Total annual demand * Ordering cost / Inventory carrying cost)

EOQ = √(2 * 1,092 * 100 / 1) = √(218,400) ≈ 467.91

Since we cannot order a fraction of an item, the optimal order quantity would be 467 units.

Therefore, the optimal order quantity using the EOQ model is 467 units.
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The net requirements of an item over 5 consecutive weeks are 50-0-15-20-20. The inventory carrying cost and ordering cost are Rs. 1 per item per week and Rs. 100 per order respectively. Starting inventory is zero. Use "Least Unit Cost Technique" for developing the plan. The cost of the plan (in Rs.) is[2007]a)200b)250c)225d)260Correct answer is option 'B'. Can you explain this answer?
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