A stationary shop sells 30,000 pens per year. Purchase cost is Rs. 2 per pen, holding cost is 20% of the purchase cost, ordering cost is Rs.15. Calculate EOQ from the details for the stationery shop.

Question

Accepted Answer

Given: Annual demand (D) = 30,000 pens, Purchase cost per pen = ₹2, Holding cost (C) = 20% of purchase cost = 20% × ₹2 = ₹0.40 per pen per year, Ordering cost (P) = ₹15.

EOQ = √((2 × P × D) / C)
EOQ = √((2 × 15 × 30,000) / 0.40)
EOQ = √(9,00,000 / 0.40)
EOQ = √22,50,000
EOQ = 1,500 pens.

The Economic Order Quantity for the stationery shop is 1,500 pens.