A building materials retailer purchases its bagged cement from a single supplier which operates 288 days a year. Demand is reasonably constant throughout the year; forecasted demand for this product next year is 2,000 tonnes. It estimates the costs of placing an order at around £30 each time an order is placed, and the annual cost of holding inventory is 22% of the purchase cost per unit. The company purchases the cement at £60/tonne.
1. Calculate the economic order quantity for the bagged cement.
2. Given the result above, how frequently should the order for the bagged cement be placed?
3. What is the total storage cost for a year?
4. What is the total ordering cost for a year?