Assuming in ur business, d cost per oder for ur product is 4000 naira and it carry cost is 400 per unit per annum ur business has a demand for 20000 unit per year,1)Calculate d order size 2)total order required during a year 3)total carried cost and total ordering cost for d year.
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To calculate the order size, we need to use the Economic Order Quantity (EOQ) formula. The EOQ formula is given by:
EOQ = √[(2 * Demand * Cost per order) / Carrying cost per unit per annum]
1) Calculate the order size:
EOQ = √[(2 * 20000 * 4000) / 400]
Simplifying the equation:
EOQ = √[(2 * 80000000) / 400]
EOQ = √(160000)
Therefore, the order size is 400 units.
2) To calculate the total order required during a year, we divide the annual demand by the order size:
Total order required = Demand / Order size
Total order required = 20000 / 400
Total order required = 50 orders per year
3) To calculate the total carrying cost for the year, we multiply the order size by the carrying cost per unit per annum:
Total carrying cost = Order size * Carrying cost per unit per annum
Total carrying cost = 400 * 400
Total carrying cost = 160000 Naira
To calculate the total ordering cost for the year, we multiply the total number of orders by the cost per order:
Total ordering cost = Total order required * Cost per order
Total ordering cost = 50 * 4000
Total ordering cost = 200000 Naira
Therefore, the total carrying cost for the year is 160,000 Naira, and the total ordering cost for the year is 200,000 Naira.