BUISENESS MANAGEMENT
INVENTORY CONTROL
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

If annual demand is 12, 000 units, the ordering cost is $6 per order and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity?

576


240


120.4


60.56

Explanation:
Detailed explanation1: ❖ If Annual Demand is 12, 000 units; Ordering Costis Rs. 90 per order and Inventory Carrying Cost is Rs. 15 per annum; then the Economic Order Quantity will be 379 units (approx).
Detailed explanation2: As a formula: TC = PC + OC + HC, where TC is the Total Cost; PC is Purchase Cost; OC is Ordering Cost; and HC is Holding Cost.
Detailed explanation3: The EOQ Method If you have a steady demand of, say, 2, 400 units per year, you multiply that by two, then by the cost of ordering one unit. Then divide by the cost of holding one unit in inventory for a year. Take the square root of the total.
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