Question

Find the economic batch quantity from the following data;

Cost of carrying inventory=15% of value per year.
Set up cost=3000 per batch
Average yearly consumption=3000units
Cost per unit=100

Answer 1

13416 units.

Step-by-step explanation:

The economic batch quantity (EBQ) can be calculated using the following formula:

EBQ = √[(2DS)/H]

where D is the annual demand, S is the setup cost, and H is the holding cost per unit.

Given:

Annual demand (D) = 3000 units

Setup cost (S) = $3000 per batch

Holding cost per unit (H) = $15 (15% of $100)

We can calculate the value of EBQ as follows:

EBQ = √[(2DS)/H]

= √[(2 x 3000 x $3000)/$15]

= √[180000000]

= 13416.41 (approx.)

Therefore, the economic batch quantity is approximately 13416 units.