Dixon plc uses a component, which it buys in from a supplier, in its manufacturing process. The estimated annual usage is 23,000 units and these are used fairly steadily throughout the year. It is estimated that the various inventories holding costs amount to £1.50 per unit per year. Investigation indicates that it costs about £50 to process each order for the component. Experience shows that delivery always occurs within one week of placing an order.

(a) What is the economic order quantity for the component?

(b) At what inventories level should the order be placed to be confident that delivery would occur before the existing inventories of the components is all used?