{"id":50163,"date":"2024-04-15T23:06:21","date_gmt":"2024-04-15T23:06:21","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=50163"},"modified":"2024-04-15T23:06:21","modified_gmt":"2024-04-15T23:06:21","slug":"from-the-following-information-calculate-the-extra-cost-of-material-by-following-eoq-annual-consumption-45000-units-ordering-cost-per-order-rs-10-carrying-cost-per-unit-per-annum-rs-10-purch","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/from-the-following-information-calculate-the-extra-cost-of-material-by-following-eoq-annual-consumption-45000-units-ordering-cost-per-order-rs-10-carrying-cost-per-unit-per-annum-rs-10-purch\/","title":{"rendered":"&#8220;From the following information, calculate the extra cost of material by following EOQ: Annual consumption = 45000 units Ordering cost per order = Rs 10 Carrying cost per unit per annum = Rs 10 Purchase price per unit = Rs 50 Re-order quantity at present = 45000 units There is discount of 10% per unit in case of purchase of 45000 units in bulk&#8221;"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;No saving&#8221; option2=&#8221;Rs. 2,00,000&#8243; option3=&#8221;Rs. 2,22,010&#8243; option4=&#8221;Rs. 2,990&#8243; correct=&#8221;option4&#8243;]<!--more--><\/p>\n<p>The correct answer is: <strong>D. Rs. 2,990<\/strong><\/p>\n<p>The economic order quantity (EOQ) is the optimal quantity of an item to order at a time in order to minimize the total inventory costs. The EOQ is calculated as follows:<\/p>\n<p>$$EOQ = \\sqrt{\\frac{2DC}{h}}$$<\/p>\n<p>where:<\/p>\n<ul>\n<li>$D$ is the annual demand for the item,<\/li>\n<li>$C$ is the ordering cost per order,<\/li>\n<li>$h$ is the carrying cost per unit per annum.<\/li>\n<\/ul>\n<p>In this case, we are given the following information:<\/p>\n<ul>\n<li>$D = 45000$ units<\/li>\n<li>$C = 10$ rupees<\/li>\n<li>$h = 10$ rupees<\/li>\n<\/ul>\n<p>Substituting these values into the EOQ formula, we get:<\/p>\n<p>$$EOQ = \\sqrt{\\frac{2 \\times 45000 \\times 10}{10}} = 3000$$<\/p>\n<p>The current re-order quantity is 45000 units, which is greater than the EOQ. This means that the company is ordering more units than necessary, which is leading to higher inventory costs.<\/p>\n<p>The extra cost of material by following EOQ can be calculated as follows:<\/p>\n<p>$$Extra \\ cost = \\frac{(Q &#8211; EOQ)C}{2}$$<\/p>\n<p>where:<\/p>\n<ul>\n<li>$Q$ is the current re-order quantity<\/li>\n<li>$EOQ$ is the economic order quantity<\/li>\n<li>$C$ is the ordering cost per order<\/li>\n<\/ul>\n<p>In this case, we have:<\/p>\n<ul>\n<li>$Q = 45000$ units<\/li>\n<li>$EOQ = 3000$ units<\/li>\n<li>$C = 10$ rupees<\/li>\n<\/ul>\n<p>Substituting these values into the formula, we get:<\/p>\n<p>$$Extra \\ cost = \\frac{(45000 &#8211; 3000) \\times 10}{2} = 2990$$<\/p>\n<p>Therefore, the extra cost of material by following EOQ is Rs. 2,990.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;No saving&#8221; option2=&#8221;Rs. 2,00,000&#8243; option3=&#8221;Rs. 2,22,010&#8243; option4=&#8221;Rs. 2,990&#8243; 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