Alpha Ltd. has an Annual demand from a single customer for 60,000 Covid-19 vaccines. The customer prefers to order in the lot of 15,000 vaccines per…

(i) Calculation of most Economical Production Run Economical Production Run = √(2 × Annual Demand × Set-up Cost) / Carrying Cost per unit per annum = √(2 × 60,000 × 4,800) / (12 × 12) = 2,000 Vaccine (ii) Calculation of Extra Cost due to processing of 15,000 vaccines in a batch When run size is 2,000 vaccines When run size is 15,000 vaccines Total set up cost = (60,000 / 2,000) × ₹ 4,800 = 1,44,000 = (60,000 / 15,000) × ₹ 4,800 = 19,200 Total Carrying cost = 1/2 × 2,000 × ₹ 144 = 1,44,000 = 1/2 × 15,000 × ₹ 144 = 10,80,000 Total Cost 2,88,000 10,99,200 Thus, extra cost = 10,99,200 - 2,88,000 = 8,11,200