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A manufacturer by certain equipment from outside suppliers at rupees 30 per unit total annual needs are 800 units the following further data are available annual return on investment is equal to 10% rent insurance taxes per unit per year is Rs 1 cost of placing order is equal to rupees 100 determine the economic order quantity?
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A manufacturer by certain equipment from outside suppliers at rupees 3...
To determine the Economic Order Quantity (EOQ), we can use the EOQ formula, which minimizes the total inventory costs. The formula is given by:
EOQ = √((2DS) / H)
Where:
- D = Annual demand (units)
- S = Cost per order
- H = Holding cost per unit per year
Given data:
- Annual demand (D) = 800 units
- Cost per order (S) = Rs 100
- Cost per unit = Rs 30
- Annual return on investment = 10%
- Rent, insurance, taxes per unit per year = Rs 1
Step 1: Calculate Holding Cost (H)
Holding cost (H) includes the cost of capital and other holding costs:
- Cost of capital per unit = 10% of Rs 30 = Rs 3
- Total holding cost (H) = Rs 3 + Rs 1 = Rs 4
Step 2: Substitute values into the EOQ formula
Now, substitute D, S, and H into the EOQ formula:
EOQ = √((2 * 800 * 100) / 4)
EOQ = √((160000) / 4)
EOQ = √40000
EOQ = 200 units
Conclusion
The Economic Order Quantity (EOQ) for the manufacturer is 200 units. This quantity minimizes the total inventory costs, balancing ordering and holding costs effectively. By ordering 200 units each time, the manufacturer can optimize their inventory management and reduce excess costs.
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A manufacturer by certain equipment from outside suppliers at rupees 30 per unit total annual needs are 800 units the following further data are available annual return on investment is equal to 10% rent insurance taxes per unit per year is Rs 1 cost of placing order is equal to rupees 100 determine the economic order quantity?
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A manufacturer by certain equipment from outside suppliers at rupees 30 per unit total annual needs are 800 units the following further data are available annual return on investment is equal to 10% rent insurance taxes per unit per year is Rs 1 cost of placing order is equal to rupees 100 determine the economic order quantity? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about A manufacturer by certain equipment from outside suppliers at rupees 30 per unit total annual needs are 800 units the following further data are available annual return on investment is equal to 10% rent insurance taxes per unit per year is Rs 1 cost of placing order is equal to rupees 100 determine the economic order quantity? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A manufacturer by certain equipment from outside suppliers at rupees 30 per unit total annual needs are 800 units the following further data are available annual return on investment is equal to 10% rent insurance taxes per unit per year is Rs 1 cost of placing order is equal to rupees 100 determine the economic order quantity?.
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