Imtiaz Super Storesells Blue Band Margarines. Its annual demand is 108,500 units. The shop incurs ordering cost of Rs650/= order, irrespective of the order size. They buy it at Rs150 per unit. The carrying cost is 12% on average inventory investment plus rent, insurance, property tax, and supervision for each unit is Rs3. The maximum sale per day is360units. It takes 5days to receivethese items from supplierafter placement of order quantities. The annual working days of Store are350 days.

Required:

i). Determine the Economic order quantities (EOQ)

ii). Determine Safety stock maximum.

iii). Determine Reorder point levels

iv). Total annual inventory cost (Total annual ordering cost and total annual carrying cost)

v). A Supplier offers 1% discount to Imtiaz Supper Store, if they purchase the goods at leastat 10,000 units at a time instead of above EOQ level (Part-i). Should they accept this offer? Please advice to management with relevant comparative workings.

vi). Why Economic order quantities may be wrong some time for any particular item to purchase in a given situation?