Verona Enterprises Ltd. purchases 2,000 units of a particular item per year at a unit cost of ₹20. The ordering cost is ₹50 per order and the inventory carrying cost is 25%. (a) Determine the optimal order quantity and m

(a) Economic order quantity (EOQ) = = = 200 units Total cost under EOQ No. of orders to be place = 2,000/200 = 10 orders Average inventory = 200/2 = 100 units Amount (₹) Ordering cost (10 * ₹50) 500 Carrying cost of average inventory (100 * ₹5) 500 Purchase cost (2,000 * ₹20) 40,000 Total cost 41,000