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A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal is
Correct answer is '0.62'. Can you explain this answer?
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A company has to manufacture 1,50,000 brackets in a year. It orders r...
Calculating the Optimal Order Quantity:
To find the optimal order quantity, we need to use the Economic Order Quantity (EOQ) formula, which is given by:
EOQ = √((2DS) / H)
Where:
- D is the annual demand (1,50,000 brackets)
- S is the cost of placing an order (Rs. 40)
- H is the annual inventory carrying cost per unit (20% of Rs. 0.15)
Calculating the EOQ:
Using the given values, we can calculate the EOQ as follows:
EOQ = √((2 * 1,50,000 * 40) / (0.15 * 0.2))
Simplifying the equation:
EOQ = √(1,20,000 / 0.03)
EOQ = √(40,00,000)
EOQ = 2000
Calculating the Variation in Order Quantity:
To find the variation in order quantity, we need to compare the optimal order quantity (EOQ) with the actual order quantity (40,000 units).
Variation = ((Actual Quantity - EOQ) / EOQ) * 100
Substituting the values:
Variation = ((40,000 - 2000) / 2000) * 100
Variation = (38,000 / 2000) * 100
Variation = 19 * 100
Variation = 1900%
Converting Variation to Percentage:
The variation in order quantity is given in percentage, so we need to express the variation as a percentage.
Variation in % = Variation / 100
Variation in % = 1900 / 100
Variation in % = 19
Rounding the Variation to Two Decimal Places:
To get the variation in percentage rounded to two decimal places, we need to divide the variation by 100.
Rounded Variation = Variation / 100
Rounded Variation = 19 / 100
Rounded Variation = 0.19
Answer:
Therefore, the variation in order quantity from the optimal quantity is 0.19 or 0.19%. However, the given answer is 0.62, which seems to be a discrepancy. Please double-check the provided answer.
To find the optimal order quantity, we need to use the Economic Order Quantity (EOQ) formula, which is given by:
EOQ = √((2DS) / H)
Where:
- D is the annual demand (1,50,000 brackets)
- S is the cost of placing an order (Rs. 40)
- H is the annual inventory carrying cost per unit (20% of Rs. 0.15)
Calculating the EOQ:
Using the given values, we can calculate the EOQ as follows:
EOQ = √((2 * 1,50,000 * 40) / (0.15 * 0.2))
Simplifying the equation:
EOQ = √(1,20,000 / 0.03)
EOQ = √(40,00,000)
EOQ = 2000
Calculating the Variation in Order Quantity:
To find the variation in order quantity, we need to compare the optimal order quantity (EOQ) with the actual order quantity (40,000 units).
Variation = ((Actual Quantity - EOQ) / EOQ) * 100
Substituting the values:
Variation = ((40,000 - 2000) / 2000) * 100
Variation = (38,000 / 2000) * 100
Variation = 19 * 100
Variation = 1900%
Converting Variation to Percentage:
The variation in order quantity is given in percentage, so we need to express the variation as a percentage.
Variation in % = Variation / 100
Variation in % = 1900 / 100
Variation in % = 19
Rounding the Variation to Two Decimal Places:
To get the variation in percentage rounded to two decimal places, we need to divide the variation by 100.
Rounded Variation = Variation / 100
Rounded Variation = 19 / 100
Rounded Variation = 0.19
Answer:
Therefore, the variation in order quantity from the optimal quantity is 0.19 or 0.19%. However, the given answer is 0.62, which seems to be a discrepancy. Please double-check the provided answer.
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Community Answer
A company has to manufacture 1,50,000 brackets in a year. It orders r...
D = 1,50,000 units
C0 = 40
Cc = 20% of unit cost
Cu = Rs. 0.15
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A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. Can you explain this answer?
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A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. 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 A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. 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 A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. Can you explain this answer?.
A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. 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 A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. 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 A company has to manufacture 1,50,000 brackets in a year. It orders raw materials for the brackets in lots of 40,000 units from a supplier. It costs Rs. 40 to place an order and estimated inventory carrying costs are 20% of the item cost, which is Rs. 0.15. The variation of cost (in %) in their order quantity from optimal isCorrect answer is '0.62'. Can you explain this answer?.
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