The quarterly production of a company's product which has a steady market of 20,000 units. Each unit of a product requires 0.5 kg of raw material at a cost of ₹20 per kg. The cost of placing an order for raw material is

Given: Quarterly Production = 20,000 units Raw material per unit = 0.5 kg Cost of raw material = ₹20 per kg Ordering Cost (O) = ₹100 per order Inventory Carrying Cost (C) = 10% of cost per kg Calculations: Annual Production = 20,000 units/quarter × 4 quarters = 80,000 units Annual Usage of Raw Material (U) = 80,000 units × 0.5 kg/unit = 40,000 kg Carrying Cost per kg (C) = 10% of ₹20 = ₹2 per kg Economic Order Quantity (EOQ) = √(2 × U × O / C) EOQ = √(2 × 40,000 kg × ₹100 / ₹2) EOQ = √(8,000,000 / 2) EOQ = √4,000,000 EOQ = 2,000 kg