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The economic batch size figure can also be obtained by taking monthly figure as follows: p17 2 x 2000 units x Rs. 324 0.10 3600 units (2) Number of Set Up per Annum Annual Production Number of set up per annum Economic run size 24,000 3,600 2 6 times 3 12 12 x 3 36 Interval between two consecutive optimum runs = = 1.8 months 20 20 20 3 (3) Minimum Inventory Cost per Year 24,000 3,600 x 324 + 3,600 2 x 1.2 Rs. 2,160 + Rs. 2,160 = Rs. 4320 Illustration: 9 A company manufactures a product from a raw material which is purchased at Rs. 60 per kg. The company incurs a handling cost of Rs. 360 plus freight of Rs.390 per order. The incremental carrying cost of inventory of raw material is Re. 0.50 per kg. per month. In addition, the cost of working capital finance on the investment in inventory of raw material is Rs. 9 per kg. per annum. The annual production of the product is 1,00,000 units and 2.5 units are obtained from one kg. of raw material