Find EOQ and Annual demand from the following:
Lead time and consumption are constant and safety stock is Rs 10000.
Maximum Level is 4 times the safety stock and carrying cost is 20% per annum.The carrying cost at optimum order size is Rs 6000 which also includes the carrying cost of safety stock.
Cost of placing an order is Rs 6000.
carrying cost =20% of avg inventory
avg inventory=carrying cost/20%
=6000/20%
= 30000
value per order =2 * 30000= 60000
annual demand=x
EOQ=under root (2 *x*6000/.20)
60000*60000=2*x*6000/.20
by solving this annual demand =60000
verify
at EOQ carrying cost=ordering cost=6000
i think this is correct??
we can obviously see that TCC=TOC when Q=Rs60000
But from where are u getting this Rs60000? where did u get this formula? Value Per order=2x30000=Rs 60000?
there is no need for any formula or u can say just go in reverse order to what u use to do for calculating total carrying cost
its total carrying cost= 20% of stock (its calculated on avg. stock)
and avg. stock is half the order/EOQ/optimum order etc
well,then something must be wrong, Max Level=Ordering Level+EOQ-CxL+Safety Stock,so if we put the same,the equation is not followed up as it says Max Level=4 times the Safety Stock
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