The annual requirement of a raw material item is 10,000 units. The holding cost of inventory for the item is 80 paise per unit per year and the ordering cost is Rs. 40 per order. The order quantity presently is 800 units per order. Assume that there are no other costs. Which one of the following observations is CORRECT?

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TuteeHUB · Accepted Answer

NA

TuteeHUB · Answer

The order quantity is optimal and total ordering cost is equal to total holding cost

TuteeHUB · Answer

The order quantity is optimal and total ordering cost is more than total holding cost

TuteeHUB · Answer

The order quantity is not optimal and total ordering cost is equal to total holding cost.

TuteeHUB · Answer

The order quantity is not optimal and total ordering cost is more than total holding cost

1.	The annual requirement of a raw material item is 10,000 units. The holding cost of inventory for the item is 80 paise per unit per year and the ordering cost is Rs. 40 per order. The order quantity presently is 800 units per order. Assume that there are no other costs. Which one of the following observations is CORRECT?
A.	The order quantity is optimal and total ordering cost is equal to total holding cost
B.	The order quantity is optimal and total ordering cost is more than total holding cost
C.	The order quantity is not optimal and total ordering cost is equal to total holding cost.
D.	The order quantity is not optimal and total ordering cost is more than total holding cost
Answer» E.

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