Pyramid Plastics, a packaging product manufacturer, is a supplier of Plastic crates to D-Mart, a large retailer in India. D-Mart has forecast an annual demand of 60,000 units. At D-Mart, the ordering cost per order is Rs. 9000 and the monthly carrying cost is 2.5%. The price of a single unit is Rs. 600. The company currently has a policy of placing 1 order every month.

(a) What is the current annual ordering cost & inventory carrying cost?

(b) Advise the management of D-Mart as to whether it should continue with its present policy or switch over to EOQ model. What would be the annual ordering and inventory carrying cost if they were to use the EOQ model?

(c) What would be the total annual cost savings by changing to EOQ policy? (5 Marks)