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Before explaining, economic batch quantity example, we told you that economic batch quantity ( EBQ)  is technique to control the cost of batch like EOQ for controlling material cost.

Now with following simple example, we can explain Economic batch size or quantity which we should have to produce.

Compute the economic batch quantity for a company using batch costing with the following information.

Annual Demand for the component 24000

Set-up cost per batch Rs. 120

Carrying Cost per Unit of Production Rs. 0.36

Economic Batch Quantity =

= Square root of ( 2 X 24000 X 120) / 0.36 ) = 4000 units

Important Note

If monthly demand is given in question, you have to convert it in annual demand by multiplying it with 12.

If carrying cost is also given on monthly basis, then you have to convert in annual basis by multiplying it with 12.

: 2
1. that's economic order quantity not economic batch quantity

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Accounting Education: Economic Batch Quantity Example
Economic Batch Quantity Example
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