GATE ME 2019 Set 2 — Question 65
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Question
The annual demand of valves per year in a company is 10,000 units. The current order quantity is 400 valves per order. The holding cost is Rs. 24 per valve per year and the ordering cost is Rs. 400 per order. If the current order quantity is changed to Economic Order Quantity, then the saving in the total cost of inventory per year will be Rs. ______ (round off to two decimal places).
Correct answer
941 to 946
Solution
Given:
Annual Demand () = 10,000 units/year
Current Order Quantity () = 400 valves/order
Holding Cost () = Rs. 24 per valve per year
Ordering Cost () = Rs. 400 per orderTotal Cost () is the sum of ordering cost and holding cost:Step 1: Calculate the current total cost ()
For the current order quantity :Step 2: Calculate the total cost at Economic Order Quantity ()
The minimum total cost occurs at EOQ () and is given by the formula:Step 3: Calculate the saving in total costRounding off to two decimal places, the saving in the total cost of inventory per year is Rs. 943.59.
Annual Demand () = 10,000 units/year
Current Order Quantity () = 400 valves/order
Holding Cost () = Rs. 24 per valve per year
Ordering Cost () = Rs. 400 per orderTotal Cost () is the sum of ordering cost and holding cost:Step 1: Calculate the current total cost ()
For the current order quantity :Step 2: Calculate the total cost at Economic Order Quantity ()
The minimum total cost occurs at EOQ () and is given by the formula:Step 3: Calculate the saving in total costRounding off to two decimal places, the saving in the total cost of inventory per year is Rs. 943.59.
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