Enchanted Bhd has estimated the following material requirements for the next year:

Quantity required for next year2500 units

Cost of the item per unitRM10 per unit

Cost per order RM50 per order

Storage cost 10% of average stock value

Required:

(a)Calculate the total annual ordering and stockholding costs for the component for each order size of:

(i) 1250 units

(ii) 500 units

(iii) 2500 units

(iv) 400 units

(v) 200 units

(b) Advice the company as to which is the optimum order size in order to minimize total cost.

(c) Use the EOQ formula to verify the answer in part (b).