Q#: The Sultan equipment Company estimates its carrying cot at 15 % and its ordering

cost at Rs 9 per order. The estimated annual requirement is 38000 units at a price of Rs 4 per unit.

Q#
Calculate Economical Order Quantity From Following Data And Prove Its Correctness With The
Help Of Table.
Annual requirement = 2400 units [ 200 units per month ]
Ordering cost = Rs. 10 per order.
Cost per unit = Rs. 1.5 per unit ; Carrying cost = 20 % carrying cost

Q#
The Rizwan Equipment company estimates its carrying cost at 15 % and its ordering cost at Rs 9.0
per order. The estimated annual requirement is 48000 units at a price of Rs 4.0 per unit.
Required : (1) What is the most economical number of units to order ?
(2) About how often will an order need to be placed ?
(3) Proof of correctness of your answer for (1) in the form of table.

Exercise No. 6.
Wadood Company present following information to calculate Economic Order Quantity
Annual requirement 1500 units.
Ordering cost Rs.8 ; Unit cost Rs.2 ; Carrying cost. 7%

Exercise No.. 7
Calculate the EOQ when the demand is 200 per week, the order cost is Rs 150 per order, the items
cost Rs 6 each and the carrying cost are 18 % per annum.

Exercise No.. 8
The Muazzam Electric Company manufactures some of its product lines from raw materials, and
for other product assembles purchased parts. For one product 10,000 sub assembled parts at Rs.100
each are purchased annually. The per order and receiving cost is Rs.200 and the carrying cost is
25%. Calculate E.O.Q.

Exercise No. 9
Find out the Economic Order Quantity from the following information .
Annual Usage : 6,000 units
Cost of Material per unit: Rs 20
Cost of placing Order: Rs 60 ; Annual carrying cost: 10 % of Inventory value.

Exercise No..10
Pak manufacturing Company uses about 150000 parts per year . The monthly usage 12500 . The
parts cost Rs. 3.50 per unit when bought in quantities and the carrying cost
is estimated to be 30% of the average inventory investment on an annual basis. The cost to place
an order and process the delivery is Rs.19.00 . It take 50 days to receive delivery , from the date
of an order, and a safety stock so 3500 parts is desired.

Required:-:- 1. Economic Order Quantity. 2. No of order per year

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Exercise No. 11
The daily demand for an electronic component is approximately 25 items. Every time an order is
placed, a fixed cost of Rs 25 is incurred. The daily holding cost per unit of inventory is 40 paisa.
If the lead time is 16 days, determine the EOQ.

Exercise No. 12
A manufacturing company has an expected usage of 300000 units of a certain product next year.
The cost of processing an order is estimated to be Rs 150 and the average carrying cost per unit is
estimated to be Rs 1.20 per unit. The order is to be placed in a multiple of 500 units. The lead time
of an article is 7 days and the company wishes to keep a reserve supply of 3000 units. Assume a
300 working day per year, calculate the following :
Economic Order Quantity.

Problem No. 11.1

Nayyar company purchases Rollers @ Rs 3 per roller , Monthly usage is 1500 rollers, the ordering
cost is Rs 50 per order, and the annual carrying cost is 40 %.
Required:-
1. Compute E.O.Q. 2. Number of order to place.
3. Give the proof of correctness with the help of a table.

Problem No.. 11.2

For XYZ Company, calculate the Economic Order Quantity from the following data and tabulate
your results :
Annual Requirement = 1600 units ; Cost of material per unit = RS 40
Cost of placing and receiving = Rs 50
Annual carrying cost of inventory = 10 % of inventory value.

Problem No. 11.3

Estimated annual required inventory = 2000 units
Material Cost per unit = Rs 2.00 ; Order Cost per order = Rs 3.00
Inventory carrying cost per unit cost = Rs 0.20 or as % of unit inventory = 10 %

Required : Calculate EOQ and prove its Correctness with the help of a table.

Problem No. 11.5

Multan manufacturing company has been buying a given item in lots of 1200 units which is a six
month’s supply. The cost per unit is Rs.12.00 . Ordering cost is Rs.10 per order and carrying cost
is 25% .
Required:- 1. Economical order quantity.
2. If the Company buys in lot size what would be its total cost, as compared to when
it buy by using EOQ.
3. Would the company made any type of savings or suffer loss, by using EOQ
formula.

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Problem NO. 11.6
A customer has been ordering 5000 specially designed metal columns at the rate of 1000 order
during the past. The variable production cost is Rs 8 per unit. It cost Rs 1000 to set up for one run
of 1000 columns, and the inventory carrying cost is 20 % . The company would like to make five
different production runs. One of its’ accountants have argued to use EOQ formula ,as it will
reduce the total cost. Now you are required to help the company by calculating :
1. Total Cost if the company makes five different production runs.
2. Total cost, if the company uses EOQ Formula.
3. Any saving in cost using EOQ formula.

Problem No.11.7
Amin Company buys its annual requirements of 36000 units in six installments. Each units cost
Rs 1 and the ordering cost is Rs 25. The inventory carrying cost is estimated at 20 % of unit value.
Find the total annual cost of existing inventory policy, How much money can get saved by using
Economic Order Quantity model.

Problem No. 11.8

Management of Shied Corp. estimates the demand for 6000 Tennis Balls. The sale price is Rs 80.
The costs relating to the ball are : manufacturing cost per ball Rs 50 ; cost to
initiate a production run , Rs 300 ; annual cost of carrying the ball in inventory, 20 % of
manufacturing cost. In prior years, the production for the balls has been scheduled in two equal
production runs ( i.e. 3000 each )

Required : The expected annual cost savings the company could experience if it employed the
EOQ model to determine the number of production runs which should be initiated during the year.

Problem No. 11.9

SailKoat Football Corporation estimates the annual demand for the 60000 football. The cost
relating to football are :
1. Cot per unit Rs 50.
2. Cot to place an order Rs 100
3. Annual cost of carrying the football in inventory 20 %.
In prior years, the demand is filled by placing 10 orders.

Required: Find the expected annual cost savings the company could experience if it employees the
EOQ model to determine the number of orders that should be placed during the year.