Q--The annual carrying cost of material ‘X’ is Rs. 3.6 per unit and its total carrying cost is
Rs. 9,000 per annum. What would be the Economic order quantity for material ‘X’, if
there is no safety stock of material X ?
SOLUTION:
Carrying Cost p.u. = Rs. 3.60
Total carrying Cost = 1/2 x EOQ x Carrying Cost P.u.
9000 = 1/2 x EOQ x 3.6 EOQ = 9000 x 2/3.6 = 5000 Economic Order Quantity = 5000 units Please explain me this solution in detail, I am unable get above colored line.
1/2*EOQ IS Average unit,u ve not even basic grasp in this subject,refer good book,if live near delhi,take N.K.AGGRWAL COSTING BOOK
Hi Priyanka,
Different books give different alphabets for the formulas
Whatever it may be,Total carrying cost = avg inventory x carrying cost per unit per annum
avg inventory is same as 1/2 EOQ as there is so safety stock here. If there was any safety stock u wud hav too add it to 1/2 of EOQ to get the avg inventory.I hope u get the logic clear
Total carrying Cost = 1/2 x EOQ x Carrying Cost P.u.
dear,
this is the formula for calculating total carrying cost here 1/2 X EOQ refer to the average of quantity ordered.
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