Answer to Question #216269 in Management for Himanshu Patil

Question

X company has a demand of 75 Lakhs per year. Setup cost and holding cost are 29 and 35 per unit. Number of pieces in a order includes 2.3 Lakhs per order. Printing is done 300 days and 2 days to deliver this magazine.What can be the EOQ of this? With above data find the Setup Cost and Holding cost for a year. What is the Reorder Point. What is the annual demand to production ratio in this case. What does it indicate for

Answer 1

Given that

Annual demand = 75 lakhs per year

Setup cost = $29 per unit

Holding cost = $35 per unit

Number of pieces in one order = 2.3 lakhs

Working days = 300 days

Lead time = 2 days

The formula to calculate EOQ is

EOD= $\sqrt{2SD \over H}$

Here, S = order cost

D = annual demand

H = holding cost

Substituting the values,

EOD= $\sqrt{2 \times 29 \times7500000 \over 35}$

EOD= $\sqrt{12428571.42}$

EOD= 3525.41