A food processing company uses 25,000 kg of corn flour every

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A food processing company uses 25,000 kg of corn flour every year. The quantity-discount price of corn flour is provided in the table below.

The order processing charges are Rs. 500/ order. The handling plus carry-over charge on an annual basis is 20% of the purchase price of the corn flour per kg. The optimal order quantity (in kg) is ______.

1. 1500
2. 1450
3. 1550
4. 1400

Correct Option: A

D = 25000 kg
C_o = Rs 500/order
C_h = 20% of unit purchase price

Q^* = 1443.376
Not a feasible solution, since price of Rs 60 is only for purchases of 1500 & above.

⇒ 13.86.75
TA(Q*) = DC + √2DC_oCh
⇒ 65 × 2500 + √2 × 2500 × 500 × 0.20 × 65
⇒ 163027.76

TAC (Q = 1500) = DC +	D	Co +	Q	Ch
	Q^*		2

⇒ 2500 × 60 +	2500	× 500 +	1500	× 0.20 × 60
	1500		2

⇒ 159833.33
So minimum cost is for 1500 quantity
Hence EOQ = 1500