GATE 2019 ME (ME2) – Question 65
Annual valve demand is 10000 units. Current order size is 400, annual holding cost Rs 24 per valve and ordering cost Rs 400 per order. Find annual inventory-cost saving on changing to EOQ (Rs), to two decimal places.
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Show answer and explanation
Correct answer: 941 to 946
Explanation
Current ordering and holding cost is $(D/Q)S+(Q/2)H=10000+4800=14800$. EOQ is $\sqrt{2DS/H}=577.350$ units, with annual relevant cost $\sqrt{2DSH}=13856.4065$. Saving is $14800-13856.4065=\mathbf{943.59}$ rupees.