Annual demand 10,000 units; ordering cost ₹100; carrying cost is 10 percent of unit cost ₹50. EOQ equals:
A447 units
B632 units
C894 units
D283 units
Answer & Solution
Correct answer: B. 632 units
1. EOQ = sqrt(2 × A × O / C) where carrying cost C is per unit per year.
2. C = 10 percent of ₹50 = ₹5 per unit per year.
3. EOQ = sqrt(2 × 10,000 × 100 / 5) = sqrt(4,00,000).
4. sqrt(4,00,000) ≈ 632 units.
_Source: ICAI BoS Inter Paper 3, Ch 2 "Material Cost", §2.5 Illus 6_
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