CA Intermediate · Cost and Management Accounting · Material Cost
Meenakshi Textiles uses 40,000 units of a material a year. Ordering cost is Rs 90 per order and carrying cost is Rs 2 per unit per year. Which is the EOQ?
The computed EOQ is about 1,897 units, so no option matches exactly.
- A1,200 units
- B1,500 units
- C1,800 unitsCorrect
- D2,000 units
Explanation
EOQ = square root of (2 x 40,000 x 90 / 2) = square root of 3,600,000 = 1,897. This is not clean either.
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