1. Leo Ltd is revising its stock policy and has the following alternatives available for the evaluation of its stock;

i) Purchase stock twice monthly of 100 units.

ii) Purchase stock monthly of 200 units

iii) Purchase every 3 months of 600 units

iv) Purchase stock every 6 months of 1,200 units

v) Purchase stock every 12 months 2,400 units

Its ascertained that the purchase price per unit is ksh. 0.80 for the whole order where deliveries are up to 500 units. A 5% discount is offered by the supplier on the total order for deliveries between 500-1,000 units and 10% discount for deliveries in excess of 1,000 units. The holding cost is ksh. 0.25 per unit of average stock held per annum and the ordering cost per order is ksh. 5.

Required

Determine the optimum order quantity for Leo Ltd (10 marks)