Kameko Ltd. Manufactures a product branded T. The product has a constant monthly demand of 8,000 units. The manufacture of the product requires a component which is purchased from a supplier at sh. 20 per unit. A lead time of four days is required from the date of order to the component. Ordering cost is sh. 60 per order while the holding cost is 10% per annum.

Required:

i) The total ordering and holding costs of the component per annum. (3 marks)

ii) Compute number of orders. (2 marks)

iii) A discount of 2% is offered on purchase of 7,000 units. Advice the company on optimal

quantity to purchase. (5 marks