CMA Intermediate · Financial Management and Business Data Analytics · Inventory Management
Gupta Electricals has annual demand of 10,000 units, ordering cost of Rs 160 per order and carrying cost of Rs 20 per unit per year. If it instead orders 800 units at a time, by how much does the annual relevant cost exceed the cost at the EOQ?
At the EOQ of 400 units the relevant cost is Rs 8,000. Ordering 800 units costs Rs 2,000 in ordering and Rs 8,000 in carrying, totalling Rs 10,000, which is Rs 2,000 more than at the EOQ.
- ARs 2,000
- BRs 1,000Correct
- CRs 3,000
- DRs 4,000
Explanation
EOQ is 400 units with cost Rs 8,000. At 800 units: orders = 12.5, ordering cost = 2,000; carrying = 400 x 20 = 8,000; total 10,000. Excess = 10,000 - 8,000 = 2,000. So the correct figure is Rs 2,000, not Rs 1,000.
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