A building materials stock list obtains its cement from a single supplier. Demand for cement is reasonably constant throughout the year. Last year the company sold 2000 tonnes of cement. It estimates the cost of placing an order at around GH25 each time an order is placed and charges inventory holding at 20 per cent of purchase cost. The company purchases cement at GH60 per tonne. How much cement should the company order at a time.

Determine the Economic Order Quantity(EOQ)

Calculate the total cost of ordering plan for EOQ in 'a' above.

After calculating the EOQ the operations manager may feel that placing an order for 'a' above may seems somewhat over-precise. He may want to order a convenient 100 tons. Calculate the expected total cost of ordering for the 100 tons. (5 marks)

Compare the unit cost/ tone for orderingthe 100tons and that of "a" above