Economic Order Quantity Problems and Solutions

Economic Order Quantity Unsolved Problem PDF



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:

Economic Order Quantity (EOQ)

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

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 problems and solutions

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 problems and solutions

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:

economic order quantity

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 .

19 Comments

  1. Ann Okoth

    the xyz import company imports olives as well as other items used by specialty restaurants. the company has determined that the ordering cost of an order of extra fenly olives is $ 90 and the carrying charges are 40% of the average value of the inventory. xyz buys approximately $ 1350000 of the olives annually. currently the company is importing the olives on an optimal eoq basis but has been given the option of purchasing the olives for 50% discount if purchases are made exactly six times a year. Should the company keep this arrangement?

    Reply
  2. saqib Ali

    The Florida company has obtained the following costs and other data pertaining to one of its materials:
    Workign days per year 250
    Normal use per day 500 units
    Max. use per day 600 units
    Min. use per day 100 units
    Lead time 5 days
    variable cost of placing one order $ 36
    variable carrying cost per unit per year $ 1

    Required:

    Economic Order Quantity

    Reply
  3. Arun

    Hi,
    I have calculated the EOQ . Now i want to order the items on 2 week basis.
    How can I redefine the formula.

    Reply
  4. Johannes Obasanjo Haukena

    What do we mean when we talk about Normal usage in units per year? is it the same as consumption?

    Reply
    • Johannes Obasanjo Haukena

      Can you work out for me this problem?

      Normal delivery time: 2.5 weeks
      Maximum delivery time: 3.5 weeks
      Normal usage: 52 000 units per year
      Purchase price per unit: N$8.50
      Cost of placing an order: N$18.00
      Interest rate: 2% per year
      Storing cost per unit: N$2.50

      Requirement
      2.2.1 Calculate the Economic Order Quantity (EOQ). [5]
      2.2.2 Calculate the re-order point if the organisation does not keep safety (minimum level) inventory. [2]
      2.2.3 Calculate the re-order point if the organisation has a policy to keep safety inventory. [2]
      2.2.4 Calculate the safety inventory that should be kept by the organisation. [2]
      2.2.5 Using your answers to the calculations above where relevant, calculate the company’s total inventory costs (holding plus ordering) for the year. [4]

      Thank you

      Reply
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    I must spend a while studying much more or figuring out more.

    Reply
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    Reply
    • Poojagarg

      A manufacturer requires 4,000kg. of a raw material
      annually. The ordering cost is Rs. 5 per order. The
      carrying cost is estimated to be 8% of average inventory
      per year. The purchase price of the raw material is Rs. 2
      per kg. Calculate the Economic lot size and the total cost.

      Reply
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  9. Chamax

    it’s really helpful for us, keep it up !!!!!!!

    I also didn’t understand Q3 Holding cost?

    Reply
    • Ama

      I suppose question 3 EOQ should have been 60 units

      Reply
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    • Naveen Singh

      A manufacturer requires 4,000kg. of a raw material
      annually. The ordering cost is Rs. 5 per order. The
      carrying cost is estimated to be 8% of average inventory
      per year. The purchase price of the raw material is Rs. 2
      per kg. Calculate the Economic lot size and the total cost.
      The manufacturer is offered a 5% discount in purchase.

      Reply
  11. Seidler

    really helpful

    Reply
  12. Ahsan Ahmed

    I didn’t understand problem 3 where UC =1 and CC=10%????

    Reply
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