Hence the EOQ (557 units) can be considered to be a feasible quantity for availing 5% discount on Purchase Pnce. (ii) When the company orders more than 6,000 units purchase price = 90% of 20 (because 10% concession) = 18; A = 36,000 units per annum; S = 25; C = 2 + 20% of 18 = 2 + 3.60 = 5.60 EOQ= 2AS 2x 36000 x 25 = 567 units app. 5.60 V7 For monthly order quantity more than or equal to 6000 units EOQ = 567 units 36000 / 567 No of orders per month = 5.29 = 6 say) = N* 12 Qty. to be ordered per month = N* XEOQ = 6*567 = 3402 units This quantity does not lie in the range of 6000 or more units. Hence the EOQ (567 units) can not be considered as feasible quantity for avaiing 10% discount on Purchase Price. To understand the effect of 10% on Total Cost, we consider the minimum value of price break quantity of this range i.e. 6000 units to be the optimum order quantity and calculate. Total Cost as follows TC = Ordering Cost + Cost of Purchasing the material + Storage Cost 6000 6000 25+ 36000x18+2x5.60 = 150 + 648000 + 16800 = 6,64.950 Hence the total cost will be minimum 6,64.950) if orders are placed in lot size of 6000 units. Illustration 13 M/s. Tubes Ltd. are the manufacturers of picture tubes of T.V. The following are the details of their operation during 2001: Average monthly market demand 2.000 tubes Ordering cost 100 per order Inventory carrying cost Cost of tubes Normal usage Minimum usage 20% per annum 500 per tube 100 tubes per week 50 tubes per week 200 tubes per week 6-8 weeks Maximum usage Lead time to supply Compute from the above: (1) Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a discount of 5%, is it worth accepting? (2) Maximum level of stock (3) Minimum level of stock. (4) Re-order level of stock