A company buys 8000 units of an item for its annual requirement. Each unit costs Rs. 10, the ordering cost per order is Rs. 30 and the carrying cost is 7.5% of the average inventory per year. The economic order quantity will be

The correct answer is A. 566 units.

The economic order quantity (EOQ) is the order quantity that minimizes the total annual cost of ordering and carrying inventory. It can be calculated using the following formula:

EOQ = √(2DC/h)

where:

D = annual demand in units

C = ordering cost per order

h = carrying cost per unit per year

In this case, we are given the following information:

D = 8000 units

C = 30

h = 0.075

Substituting these values into the formula, we get:

EOQ = √(2800030/0.075) = 566 units

Therefore, the economic order quantity is 566 units.

Option B is incorrect because it is the order quantity that minimizes the ordering cost. Option C is incorrect because it is the order quantity that minimizes the carrying cost. Option D is incorrect because it is the order quantity that minimizes the total annual cost of ordering and carrying inventory.