Question

A stationery shop sells - 30,000 pens per year. Purchase cost is Rs. 2 per pen; Holding cost is – 20% of the purchase cost; Ordering cost is Rs.15. Calculate the EOQ from the following details for the stationery shop.

Answer 1

Economic Ordering Quantity

= √(2 x annual usage x ordering cost per unit) / Carrying cost per unit

Thus as : annual usage = 30,000 

Order cost = Rs. 15 

Annual carrying cost of 1 unit = 20% of inventory value .i.e.