1) Sean Co produces electrical components and wishes to minimize its inventory costs. The following data is available for the two components:

Component L562

Ordering costs	K1000 per order
Inventory holding costs	K80 per unit per annum
Annual demand	1,225

Component A382

Average usage	100 units per day
Minimum usage	60 units per day
Maximum usage	130 units per day
Lead time	20 26 days
Economic order quantity (EOQ)	4000 units

Required:

a) Calculate the following:

(I) The economic order quantity (to the nearest whole unit) for component L562.

(3 marks)

(II) The maximum inventory level for component A382. (3 marks)

b) Outline the assumptions that underpin the EOQ model. (6 marks)