Page 267 - DCOM303_DMGT504_OPERATION_RESEARCH
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Operations Research
Notes
`
Therefore EOQ =
`
=
EOQ = 800 units
2. Number of order per annum
=
= 4 orders p.a.
3. Time between two consecutive orders
=
= 3 months
Task The annual consumption of a particular material in a factory is 3,000 units. Interest
and cost of storing a unit costing ` 5 per unit is 10%. Cost of placing an order is ` 30. Find
the EOQ using.
a. Equation method.
b. Tabular method.
c. Graphical method.
Self Assessment
State true or false:
1. The cost which is incurred to place an order is called as carrying cost.
2. Carrying cost is usually represented in terms of percentage on purchase price of average
quantity to be held.
3. EOQ concept can be studied under two situations: in the absence of quantity discounts and
in the presence of quantity discounts.
13.1.2 In the Presence of Quantity Discounts
Cost Comparison Method
Under this method, generally the total cost of ordering two lots would be considered and the
quantity discount to be availed and the lot which reveals the lowest total cost inclusive of the
purchase price is said to be the EOQ.
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