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Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:
- a)400
- b)2,828
- c)4,000
- d)8,000
Correct answer is option 'C'. Can you explain this answer?
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Economic order quantity (EOQ) is a formula used in inventory management to determine the optimal order quantity that minimizes the total cost of ordering and holding inventory. The formula for EOQ is given by:
EOQ = sqrt((2 * D * S) / H)
Where:
D = Annual demand for springs = 800,000
S = Cost of making a purchase order = Rs. 1,200
H = Cost of storage of springs per piece per annum = Rs. 120
Let's calculate the EOQ using the given values:
EOQ = sqrt((2 * 800,000 * 1,200) / 120)
= sqrt(1,600,000)
= 1,264.9
The EOQ is approximately 1,264.9 springs. However, since we cannot order a fraction of a spring, we round up the EOQ to the nearest whole number.
Therefore, the economic order quantity is 1,265 springs.
Now, let's evaluate the answer choices:
a) 400: This is not the correct answer as it is significantly lower than the calculated EOQ of 1,265 springs.
b) 2,828: This is not the correct answer as it is significantly higher than the calculated EOQ.
c) 4,000: This is the correct answer as it is the closest to the calculated EOQ of 1,265 springs.
d) 8,000: This is not the correct answer as it is significantly higher than the calculated EOQ.
Therefore, the correct answer is option c) 4,000.
EOQ = sqrt((2 * D * S) / H)
Where:
D = Annual demand for springs = 800,000
S = Cost of making a purchase order = Rs. 1,200
H = Cost of storage of springs per piece per annum = Rs. 120
Let's calculate the EOQ using the given values:
EOQ = sqrt((2 * 800,000 * 1,200) / 120)
= sqrt(1,600,000)
= 1,264.9
The EOQ is approximately 1,264.9 springs. However, since we cannot order a fraction of a spring, we round up the EOQ to the nearest whole number.
Therefore, the economic order quantity is 1,265 springs.
Now, let's evaluate the answer choices:
a) 400: This is not the correct answer as it is significantly lower than the calculated EOQ of 1,265 springs.
b) 2,828: This is not the correct answer as it is significantly higher than the calculated EOQ.
c) 4,000: This is the correct answer as it is the closest to the calculated EOQ of 1,265 springs.
d) 8,000: This is not the correct answer as it is significantly higher than the calculated EOQ.
Therefore, the correct answer is option c) 4,000.
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Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct answer is option 'C'. Can you explain this answer?
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Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct 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 Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct 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 Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct answer is option 'C'. Can you explain this answer?.
Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct 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 Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct 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 Market demand for springs is 8,00,000 per annum. A company purchases these springs in lots and sells them. The cost of making a purchase order is Rs.1,200. The cost of storage of springs is Rs.120 per stored piece per annum. The economic order quantity is:a)400 b)2,828 c)4,000 d)8,000Correct answer is option 'C'. Can you explain this answer?.
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