Fundamentals of Financial Management, Third Edition

SOLVED NUMERICAL PROBLEMS

1. A firm uses 1,100 units of a raw material per annum, the price of which is Rs 1,500 per unit. The order cost per order is Rs 150 and the carrying cost of the inventory is Rs 200 per unit. Find the EOQ and the number of orders that are to be made during the year.

   Solution

   Based on Eq. 11.2,

   

   No. of orders during the year = 1,100/41 = 26.8 or 27

    

2. A factory uses 40,000 tonnes of raw material priced at Rs 50 per tonne. The holding cost is Rs 10 per tonne of inventory. The order cost is Rs 200 per order. Find the EOQ. Will this EOQ be maintained if the supplier introduces 5% discount if the order lot is 2000 tonnes or more? ...