**Economic Order Quantity Problems and Solutions**

Contents

**Previous Lesson: Inventory Management Problems**

**Next Lesson: Cost Volume Profit Analysis Problems**

**Problem # 1: **

Calculate **Economic Order Quantity** (EOQ) from the following:

Annual consumption 6,000 units

Cost of ordering Rs. 60

Carrying costs Rs. 2

**Solution:**

*EOQ =600 Units*

>> More Reading Economic Order Quantity.

**Problem # 2: **

From the following particulars, calculate the Economic Order Quantity (EOQ):

Annual requirements 1,600 units Cost of materials per units Rs. 40

Cost of placing and receiving one order: Rs. 50 Annual carrying cost for inventory value 10%

**Solution:**

*EOQ = 200 Units*

>> More Reading Inventory Management.

**Problem # 3:**

Calculate EOQ from the following?

Consumption during the year = 600 units Ordering cost Rs. 12 per order

Carrying cost 20% Selling Price per unit Rs. 20

* *

**Solution:**

*Economic Order Quantity = 379 Units*

>> Practice Inventory Management Problems and Solutions.

**Problem # 4: **

A manufacturer buys certain equipment form suppliers at Rs. 30 per unit. Total annual needs are 800 units. The following further data are available:

Annual return on investments 10% Rent, insurance, storing per unit per year Rs. 2

Cost of placing an order Rs. 100

*Required: EOQ*

* *

**Solution:**

*EOQ = 200 Units*

>> More Reading Cost of Goods Sold.

**Problem # 5: **

From the figures given below, calculate Economic Order Quantity (EOQ) and Total cost at EOQ?

Total consumption of material per year 10,000 kgs Buying cost per order Rs. 50

Unit cost of material Rs. 2 per kg Carrying and storage cost 8%

**Solution:**

*EOQ = 2,500 Units*

* *

*Total Inventory Cost = [Fixed ordering cost (F) * Number of Order per year N] + [Carrying Cost (C)* EOQ/2]*

Total Inventory Cost = [50 * 10,000/2,500] + [(2*0.08)* 2,500/2]

Total Inventory Cost = 200 + 200

*Total Inventory Cost = Rs. 400*

>> More Reading Costing .

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