Answer to Question #229968 in Economics for Tarun Kumar

Question

Nirmal Soul pvt Ltd is a manufacturer of bath towels. The company has to supply his customer 

750 units of his product per year. 

Any type of shortage is not acceptable.

The inventory carrying cost is is Rs 2.4 per unit per year

The set up cost per run is Rs 100 

Compute 

a. What should be the optimum order size and the optimum number of orders which should be 

executed

b. Calculate the total cost for the optimum order size

Answer 1

$$Q=750$$

$$p=2.4$$

$$FC=100$$

$$TR=pQ=750\times2.4=1800$$

$$\frac{1800-100}{750}=2.27$$