The estimated annual demand for a product is 10,000 units, the annual holding costs amount to 20%

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The estimated annual demand for a product is 10,000 units, the annual holding costs amount

to 20% of the average inventory value, and the ordering costs are Rs. 100 per order. No shortage

is to be allowed. The normal price charged by the supplier is Rs. 10. However, a discount of 2%

is allowed on an order for atleast 1,000 units. The discount rate will be raised by 5%, if the order

is for 2500 or more.

Determine the most economical order quantity. If the discount slab of 1000 is raised to 1500

units, how will you compute the most economical order?

Related Book For answer-question

Introduction to Operations Research

ISBN: 978-1259162985

10th edition

Authors: Frederick S. Hillier, Gerald J. Lieberman

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Posted Date: May 10, 2024 10:44 AM

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The estimated annual demand for a product is 10,000 units, the annual holding costs amount to 20%

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Expert Answer:

To determine the most economical order quantity we need to use the Economic Order Quantity EOQ formu... View the full answer

Introduction to Operations Research

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