Pink & Blue Stores sells 1000 insulated water bottles annually. Demand for the product is uniform. Purchase Cost per bottle is Rs.50. Holding cost per annum is 10% of purchase cost. Ordering cost is Rs. 100 per order. Calculate the Economic Ordering Quantity for bottles?
Economic Ordering Quantity = √(2PD/C)
Thus as : annual demand (D) = 1000 bottles.
Order cost (P) = Rs. 100
Annual carrying cost of 1 unit (C/i) = 10% X 50= Rs.5
EOQ = √(2 x 1000 x 100/5
= 200 units.
