Kwality Stores is famous for its woollen garments sourced from Ludhiana. Its most popular selling item is its sweat-shirt which is sold at Rs.1,000 per piece. The cost of placing an order and receiving goods is Rs.500 per order. Its holding cost is Rs.300 p.a. Economic order quantity for Kwality Stores is 200 sweat-shirts. Calculate the annual demand of the sweat-shirts.

Question

Accepted Answer

Given:
- Selling Price (SP) per sweat-shirt = Rs.1,000
- Cost of placing an order (P) = Rs.500 per order
- Holding cost (C) = Rs.300 per annum
- Economic Order Quantity (EOQ) = 200 sweat-shirts

We need to calculate the Annual Demand (D).

The EOQ formula is:
EOQ = sqrt((2 x P x D) / C)

Squaring both sides:
EOQ^2 = (2 x P x D) / C

Rearranging to solve for D:
D = (EOQ^2 x C) / (2 x P)

Substituting the values:
D = (200^2 x 300) / (2 x 500)
D = (40,000 x 300) / 1,000
D = 1,20,00,000 / 1,000
D = 12,000

The annual demand for sweat-shirts is **12,000 units**.