Question

The information of two products P and Q is given as 

Hint:

EOQ helps in determining the optimal order quantity that minimizes both ordering and holding costs. Use it for cost-effective inventory management.

Answer 1

The Economic Order Quantity (EOQ) is calculated using the formula: \[ EOQ = \sqrt{\frac{2 \cdot D \cdot S}{H}} \] where:
- \(D\) is the annual demand,
- \(S\) is the ordering cost per order,
- \(H\) is the holding cost per unit per year.
For product P: \[ EOQ_P = \sqrt{\frac{2 \cdot 2500 \cdot 60}{30}} = \sqrt{\frac{300000}{30}} = \sqrt{10000} = 100 \] For product Q: \[ EOQ_Q = \sqrt{\frac{2 \cdot 3600 \cdot 80}{40}} = \sqrt{\frac{576000}{40}} = \sqrt{14400} = 120 \]