AC=Annual Consumption 3000 Units Unit Cost = 5 Rs.

R=Re-Ordering Cost 30 Rs. Per order

C=Inventory Carrying Cost 10% of the average value of the Inventory
Q=Reorder Quantity

No. of order 1 2 3 4 5 6 7 8 9 10
Ordering Quantity (Q) 3000 1500 1000 750 600 500 428.5714 375 333.3333 300
Avg Stock(Q/2) 1500 750 500 375 300 250 214.2857 187.5 166.6667 150
Ordering Cost 30 60 90 120 150 180 210 240 270 300
Average Value Of Inventory 7500 3750 2500 1875 1500 1250 1071.429 937.5 833.3333 750
Carrying Cost 750 375 250 187.5 150 125 107.1429 93.75 83.33333 75
Total Cost 780 435 340 307.5 300 305 317.1429 333.75 353.3333 375

Total cost is minimized when the orderimg cost=Carrying cost

i.e Ordering Cost=Carrying Cost

Using the Formula 600