Question

For a particular item the usage is 2000 units per year, the ordering cost is $10. The inventory carrying cost is 20 nd the unit cost is $5. The economic order quantity is?

Answer 1

The inventory carrying cost is 20 and the unit cost is $5 .The economic order quantity is 200 units.

Demand = 2000

Ordering cost = $10

Inventory carrying cost = 20% of 5 = $1

Economic order quantity = sqrt(2DS/H)

= Sqrt(2*2000*10/1)

= Sqrt(40000)

Economic order quantity = 200

Inventory refers to all the items, goods, goods, and materials that a business holds for sale in the market to make a profit. Example: If a newsagent uses a vehicle to deliver newspapers to customers, only the newspapers are considered inventory. A car is treated as an asset.

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