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Unit 13: Inventory Control
Solution: Notes
1. Calculation of ordering cost per order
`
= = ` 0.81 per order
2. Calculation of carrying cost
`
= = × 100 = 17%
`
(i) Purchase Price/year
= 760 pieces × ` 12 = ` 9,120
(ii) Purchase expenses per year
= 760 pieces/10 Lot size
= 76 orders
= 76 orders × Re. 0.81/order
= ` 61.56
3. Storage expenses per year
= × ` 12 × = ` 10.20
4. Capital cost per year
= = ` 6.00
5. Total Cost = (a) + (b) + (c) + (d) = ` 9,197.76
Example: The annual demand for an item is 3,200 units. The unit cost is ` 6 and inventory
carrying charges 25% p.a. If the cost of one procurement is ` 150, determine:
1. EOQ
2. Number of orders p.a.
3. Time between two consecutive order
Solution:
1. Calculation of EOQ
=
Where, O = ` 150 per order
U = 3,200 units
C = 25% p.a.
P = ` 6/unit
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