"From the following information, calculate the extra cost of material by following EOQ:
Annual consumption = 45000 units
Ordering cost per order = Rs 10
Carrying cost per unit per annum = Rs 10
Purchase price per unit = Rs 50
Re-order quantity at present = 45000 units
There is discount of 10% per unit in case of purchase of 45000 units in bulk"

Annual Cost under EOQ will be as under -
Annual ordering Cost = 300/2×10 = Rs.1500
Annual Carrying Cost = 45000/300×10 = Rs. 1500
Total cost under EOQ will be Rs. 3000.

Annual Cost as per current plan will be as under -
Annual ordering cost = Rs.10
Annual Carrying cost = 45000/2×10 = Rs. 225000
Saving due to bulk order = 45000×(50×10%) = Rs.225000
Effective cost will be Rs.10

So, Extra cost will be Rs.3000-10 = Rs.2,990

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