GATE 2026 ME – Question 61
The inventory holding cost of an item is ₹ 0.50 per unit per month and the ordering cost per order is ₹ 550. A stockist needs to supply 10000 units of the item per year to the customers. Assume demand is fixed and shortage cost is infinite. Using classical economic order quantity (EOQ) model, the optimal lot size is ________ units per order (*rounded off to nearest integer*).
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Correct answer: 1354
Explanation
The annual holding cost is $0.50 \times 12 = ₹6$ per unit per year. The economic order quantity is $\sqrt{\frac{2DS}{H}} = \sqrt{\frac{2 \times 10000 \times 550}{6}} = \sqrt{1{,}833{,}333} = 1354$ units.