Kombo Ltd. is a large cash and carry warehouses which sells electronics. Kombo Ltd. Purchases the most popular model of calculators (FX 100) directly form the manufacturer at a cost of Sh.250 each. Average sales per a 300 day year are 475 calculators. Whenever an order with the manufacturers is placed, Kombo Ltd, Incurs a cost of Sh.50. The stock holding costs are estimated at Sh.12.50 plus 10% opportunity cost of capital. The lead-time is three days. During the last 50 stock cycles, the demand during the lead-time has generated the following frequency distribution:

Lead time demand0

I

2

3

45

6

78

NumberofstockI

cycles

2

6

8

I08

8

52

Each time the warehouses runs out of stock, an emergency order is placed with an extra cost of Sh.20 per calculator.

Required:

a) The economic order quantity (EOQ) and the reorder level.(10 marks)

b) The total annual relevant costs for the order quantity in (a) above.(5 marks