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GATE 2018 ME (ME2) – Question 28

Production Planning and Control · Inventory control: deterministic models, safety stock, control systems · 1 mark · Multiple choice

A tyre distributor expects annual demand of 9600 steel-belted radial tyres. Annual holding cost is Rs. 16/tyre and ordering cost Rs. 75/order. Find the economic order quantity.

  1. 64
  2. 212
  3. 300
  4. 1200

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Correct answer: (C) 300

Explanation

For constant-demand EOQ, $Q^*=\sqrt{2DS/H}$. Substitute D = 9600/year, S = 75/order and H = 16 per tyre-year: $$Q^*=\sqrt{2(9600)(75)/16}=300.$$ Answer **C**.