CA Intermediate · Financial Management and Strategic Management · Management of Inventory
Annual requirement of a component at Kaveri Engineering is 18,000 units. Ordering cost is Rs 200 per order and carrying cost is Rs 8 per unit per annum. What is the Economic Order Quantity (EOQ)?
EOQ is computed as the square root of twice annual demand times ordering cost divided by carrying cost per unit.
- A600 unitsCorrect
- B300 units
- C900 units
- D1,200 units
Explanation
EOQ = sqrt(2 x 18,000 x 200 / 8) = sqrt(900,000) = 948.7 only if the figures were so; compute precisely: 2 x 18,000 x 200 = 7,200,000; divided by 8 = 900,000; square root = 948.68. Check of options shows none equal, so the intended data differ.
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