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sir please tell me. how to find only the holding cost?.. in the qsn they have given demand 40000. order 4000 each time.buffer 400u. H.cost per unit $4.
If it was not for the buffer, then since they are ordering 4,000 each time the average inventory throughout the year would be 4,000 / 2 = 2,000.
However, the buffer (or safety inventory) means that they are holding an extra 400 all year just to be extra safe.
So the average inventory is now 400 higher at 2,400 (2,000 + 400), and the holding cost will be therefore 2,400 x $4 per year.
Hi,
hv a problem
A TV manufacturing company has annual demand of 32000 units. Set up cost per batch is Rs 120.Annual ROI is 12%. Cost of production/ unit= Rs 16. Find EOQ.Please help.
Thanks,
DeepmaD = 32000; Co = 120; Ch = 12% x 16 = 1.92
Then it is just putting the figures in the formula.(This question could not possibly be asked in Paper F2 for two reasons. Firstly you will be told that the 12% is the rate of interest (not the ROI). Secondly, if they are producing the product themselves it should be the EBQ (not the EOQ) but for that you would also need to know the rate of production.)
Have you watched the free lectures on inventory control?
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