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Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ?
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Anil & company buys its annual requirement of 36,000 units in 6 instal...
Calculating Total Annual Carrying and Ordering Cost under Existing Policy:
- Number of orders per year = Total units / Order quantity = 36,000 / 6 = 6,000
- Ordering cost per year = Number of orders per year * Ordering cost per order = 6,000 * Rs. 25 = Rs. 150,000
- Average inventory level = Order quantity / 2 = 6 / 2 = 3,000 units
- Annual carrying cost = Average inventory level * Unit cost * Carrying cost percentage = 3,000 * Rs. 1 * 20% = Rs. 600
Total annual carrying and ordering cost = Rs. 150,000 + Rs. 600 = Rs. 150,600
Calculating Savings using EOQ:
- EOQ (Economic Order Quantity) formula: EOQ = sqrt((2 * Demand * Ordering cost) / Carrying cost per unit)
- EOQ = sqrt((2 * 36,000 * 25) / 0.20) = sqrt(1,800,000 / 0.20) = sqrt(9,000,000) = 3,000 units
- Number of orders with EOQ = Demand / EOQ = 36,000 / 3,000 = 12
- Ordering cost with EOQ = Number of orders * Ordering cost per order = 12 * Rs. 25 = Rs. 300
- Carrying cost with EOQ = EOQ / 2 * Unit cost * Carrying cost percentage = 1,500 * Rs. 1 * 20% = Rs. 300
Total annual carrying and ordering cost with EOQ = Rs. 300 + Rs. 300 = Rs. 600
Savings by using EOQ = Rs. 150,600 - Rs. 600 = Rs. 150,000
By using EOQ, Anil & Company can save Rs. 150,000 annually in carrying and ordering costs compared to their existing policy of ordering in 6 instalments. This is achieved by optimizing the order quantity to minimize total costs associated with inventory management.
- Number of orders per year = Total units / Order quantity = 36,000 / 6 = 6,000
- Ordering cost per year = Number of orders per year * Ordering cost per order = 6,000 * Rs. 25 = Rs. 150,000
- Average inventory level = Order quantity / 2 = 6 / 2 = 3,000 units
- Annual carrying cost = Average inventory level * Unit cost * Carrying cost percentage = 3,000 * Rs. 1 * 20% = Rs. 600
Total annual carrying and ordering cost = Rs. 150,000 + Rs. 600 = Rs. 150,600
Calculating Savings using EOQ:
- EOQ (Economic Order Quantity) formula: EOQ = sqrt((2 * Demand * Ordering cost) / Carrying cost per unit)
- EOQ = sqrt((2 * 36,000 * 25) / 0.20) = sqrt(1,800,000 / 0.20) = sqrt(9,000,000) = 3,000 units
- Number of orders with EOQ = Demand / EOQ = 36,000 / 3,000 = 12
- Ordering cost with EOQ = Number of orders * Ordering cost per order = 12 * Rs. 25 = Rs. 300
- Carrying cost with EOQ = EOQ / 2 * Unit cost * Carrying cost percentage = 1,500 * Rs. 1 * 20% = Rs. 300
Total annual carrying and ordering cost with EOQ = Rs. 300 + Rs. 300 = Rs. 600
Savings by using EOQ = Rs. 150,600 - Rs. 600 = Rs. 150,000
By using EOQ, Anil & Company can save Rs. 150,000 annually in carrying and ordering costs compared to their existing policy of ordering in 6 instalments. This is achieved by optimizing the order quantity to minimize total costs associated with inventory management.
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Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ?
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Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ?.
Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Anil & company buys its annual requirement of 36,000 units in 6 instalments.Each unit costs R.s 1 and ordering cost is R.s 25 . The inventory carrying cost is estimated at 20% of unit valu. Find out the total of annul carrying and ordering cost under existing policy . How much money can be saved by using EOQ?.
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