The demand rate for a particular item is 12000 units/year. The ordering cost is Rs. 100 per order and the holding cost is Rs. 0.80 per item per month. If no shortages are allowed and the replacement is instantaneous, then the number of orders per year is

Explanation

Concept : Optimum number of quantities (Q*) can be calculated by: where, D = Demand rate for a particular item, C 0= Ordering cost per order, C h = Holding cost per item per year Calculation: Given: D = 12000 units/year, C 0= Rs.100/order C c = 0.80 per item per month = 0.80 × 12 = 9.6 Rs. per item per year No shortages are allowed and replacement is instantaneous