Rohan is selling 1000 t-shirts at a price of ₹800. The cost of placing the order is ₹400 per order. Inventory holding cost is ₹20 perunit per annum. What is the economic order quantity for Rohan?

200

Formula for calculating EOQ (Q) =\(\sqrt\frac{2PD}{C} \) where
D= Annual Demand for the item (SKU)
P: Cost of placing and receiving one Order (does not include purchase price)
C: Inventory carrying cost per unit. This may be derived by multiplying the unit price of the item by the carrying cost expressed as %age of the unit price.
S: Safety Stock level for the item.
Here, D = 1,000; P = 400 and C = 20
So 2 x P x D = 8,00,000
This divided by 20 = 40000
Square root of which is = 200
So the EOQ is 200 shirts.