A company manufactures eye-glass frames at the rate of 1,200 frames per month. The company wants to determine the most economical production batch…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
A company manufactures eye-glass frames at the rate of 1,200 frames per month. The company wants to determine the most economical production batch size to minimize total setup and holding costs. The following information is available: Setup cost per batch = 7,200Cost per unit = 3,240Carrying cost = 10% per annum (including storage, cost of capital, and obsolescence) What is the Economic Batch Quantity (EBQ)?
(A) 230 frames
(B) 566 frames
(C) 800 frames
(D) 1,200 frames

Suggested Answer and Working Notes:

Correct Answer: Option (C)

800 frames

Topics: Marginal Costing, Unit & Batch Costing

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