A factory requires 1,500 units of an item per month. The cost of each unit is 27. The cost per order is 150 and material carrying charge works out to 20% of the average material. Find out the economic order quantity (EOQ) and ascertain the number of orders to be placed per year. Would you accept a 2% price discount on a minimum en ingly of 1,200 units? When No Discount is Available Annual requirement 1500 units X 12 = 18,000 units 2xUXP 2x18,000 x 150 54,00,000 S 20% of 27 5.40 = 10,00,000 EOQ = 1000 Units No. of orders per year - 18000 + 1000 = 18 orders If discount is given (original price -2% discount) Cost price - 27 -0.54 = 26.46 r52 52 EP-CMA When 2% Price Discount is Available No of orders to be placed: 18000 + 1200 = 15 orders Material carrying cost: 20% of 26.46 = 35.292 Total cost without discount = ordering cost + carrying cost + purchase price = 18 x 150 + V2 x 1000 x 5.40 + 18000 x 27 = 2700 + 2700 +4,86,000 = 34,91,400 Total cost with 2% discount = 15 x 150 + 2 x 1200 x 5.292 + 18000 x 26.46 = 2250 +3175.20 + 4,76,280 = 34,81,705.20 Since the total cost is less with 2% discount, the proposal may be accepted. A company manufacturers 5,000 units of a product per month. The cost of placing an order is 100. The purchase price of the raw material is 10 per kg. The re-order period is 4 to 8 weeks. The consumption of raw materials varies from 100 kg. to 450 kg. per week. The average weekly consumption being 275 kg. The carrying cost of inventory is 20% per annum. Assuming 52 weeks in a year, you are required to calculate - (0) Re-order quantity: (ii) Maximum level; (iii) Minimum level; and (iv) Average level