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

1095

Step-by-step explanation:

The economic batch quantity (EBQ) is the optimal order quantity that minimizes the total cost of ordering and carrying inventory.

To find the EBQ, we can use the following formula:

EBQ = sqrt((2DS)/(H))

where

D = annual demand

S = setup cost per order

H = holding cost as a percentage of the value per unit

Here, we have:

D = 3000 units/year

S = $3000 per batch

H = 15% of $100 per unit per year = $15 per unit per year

Substituting these values in the formula:

EBQ = sqrt((230003000)/(15*100))

= sqrt(1200000)

= 1095.45

Therefore, the economic batch quantity is approximately 1095 units. This means that the company should order 1095 units at a time to minimize the total cost of ordering and carrying inventory.