The demand rate for a particular item is 12000 units/year. The ordering cost is Rs. 100 per order and the holding cost is Rs. 0.80 per item per month. If no shortages are allowed and the replacement is instantaneous, then the number of orders per year is
24
Number of Orders per Year (N) = Total Annual Demand (D) / Economic Order Quantity (Q^*) \[N = (D)/(Q^*)\] Let's calculate the number of orders: \[N = (12000)/(500)\] \[N = 24 orders per year\] Therefore, the number of orders per year required to meet the demand optimally, given the costs, is 24.
Important Questions from Inventory Control
- AB Ltd. manufactures filing cabinets. For the current year, the company expects to sell 4,000 cabinets involving a loss of Rs. 2,00,000. Only 40 percent of the plant's normal capacity is being utilised during the current year. The fixed costs for the year are Rs. 10,00,000 and fully variable costs are 60 percent of the sales value. What is the break-even point in terms of sales value?
Margin of safety in break-even analysis is
A manufacturing company has an expected usage of 50,000 units of a certain product during next year. The cost of processing an order is Rs. 20 and the carrying cost per unit is Rs. 0.50 for one year. What will be the Economic Ordering Quantity ?
For an organization producing a product, the fixed cost per month is Rs. 12000. The variable cost per product is Rs. 24. The unit selling price of the product is Rs. 48. To achieve break-even, the minimum production per month shall be
Break-even point shows that
