CA Inter P4 · Chapter 8 · Question 2 of 9
Annual demand for a part is 36,000 units. Set-up cost per production batch is ₹1,500 and the cost of carrying one unit in stock for a year is ₹12. The economic batch quantity is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 3,000 units
Explanation
EBQ = sqrt(2DS/C) = sqrt(2 x 36,000 x 1,500 / 12) = sqrt(90,00,000) = 3,000 units, where D is annual demand, S set-up cost per batch and C carrying cost per unit per annum.
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