Question
Hekmatia Dawa khana uses Neem oil for one of its Ayurbadiya drug. It requires 35 thousand litres of Neem oil annually. The oil must be
Hekmatia Dawa khana uses Neem oil for one of its Ayurbadiya drug. It requires 35 thousand litres of Neem oil annually. The oil must be purchased in multiples of 250 litres. Ordering costs are Tk.500 per order. Annual carrying costs are 20 percent of the purchase price of Tk.8 per litre. Hekmatia maintains a safety stock of 20,000 litres. The delivery time is 3 weeks (1 year = 52 weeks).
i. How many litres of the inventory should Hekmatia order to minimise its total cost? ii. At what inventory level should an order be placed to prevent having to draw on the safety stock? iii. What is the average, maximum, and minimum value of inventory?
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