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6 . Somerset Corporation purchases a particular brand of microchip used in the assembly of computers directly from the supplier. It costs the company RM

6. Somerset Corporation purchases a particular brand of microchip used in the assembly of computers directly from the supplier. It costs the company RM8 each time it places an order with the manufacturer for the microchips. The supplier will deliver order of any size for a charge of RM4 and cost of holding an item in inventory for a year is estimated to be 20% of the cost price. Samuel, the store manager estimates that total annual demand for the microchip will be 600 units, with a constant demand rate throughout the year. Currently, the store is making 250 orders, two times in a month. Goods are received 10 days after an order has been placed. The store is open for business 300 days in a year.
a) Calculate the total inventory cost based on the current ordering policy.
b) Compute the optimum order quantity and calculate the associated minimum total inventory cost.
c) Based on the optimum order quantity, determine the reorder point.
d) If the supplier offers large order discounts of 8% and 10% for single order quantities of minimum 400 and 500 respectively, should the company change its ordering policy?

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