Question

A company estimates the demand of 2000 bulbs for the next year. The ordering cost is Rupees 300 per order and the annual carrying cost per bulb is Rupees 30. The economic order quantity (number of bulbs) is .......... (Answer in integer)

Hint:

EOQ is a crucial concept in inventory management that helps determine the most cost-effective order quantity. It minimizes the total cost of ordering and carrying inventory.

Answer 1

The Economic Order Quantity (EOQ) can be calculated using the following formula:
\[ EOQ = \sqrt{\frac{2DS}{H}} \] Where:
- \( D \) is the annual demand,
- \( S \) is the ordering cost per order,
- \( H \) is the annual carrying cost per unit.
Given:
- \( D = 2000 \) bulbs (annual demand),
- \( S = 300 \) Rupees per order (ordering cost),
- \( H = 30 \) Rupees per bulb (carrying cost).
Substituting the values into the EOQ formula:
\[ EOQ = \sqrt{\frac{2 \times 2000 \times 300}{30}} = \sqrt{\frac{1,200,000}{30}} = \sqrt{40,000} = 200 \] Thus, the economic order quantity (EOQ) is 200 bulbs. The correct answer lies between 199 and 201.