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

CS Professional · Financial, Treasury and Forex Management · PYQS · December 2021
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 ₹100 and inventory carrying cost is 10%. You are required to calculate : (ii) Number of order placed in a year.

Answer & Explanation:

Given: Annual Usage of Raw Material (U) = 40,000 kg (from part i) Economic Order Quantity (EOQ) = 2,000 kg (from part i) Calculations: Number of orders placed in a year = Annual Usage / EOQ Number of orders = 40,000 kg / 2,000 kg Number of orders = 20 orders

Topics: Working Capital Management

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