Q-1 Ravi Club shall purchase 6,000 dozens of tennis balls next year. Policy manual of the...

 

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Q-1 Ravi Club shall purchase 6,000 dozens of tennis balls next year. Policy manual of the club prescribes to impute 10% interest on average inventory investment. Other costs associated with storage amount to Rs.216 per dozen. The cost involved in handling each purchase order is Rs.3,000. Price quoted by the supplier is Rs.3,600 per dozen. Required: (a)-Economic order quantity. (b)-Secretary of the club proposes to buy 2,000 dozens tennis balls in each order. Show how much the club can save by buying in economic order quantity. Q-1 Ravi Club shall purchase 6,000 dozens of tennis balls next year. Policy manual of the club prescribes to impute 10% interest on average inventory investment. Other costs associated with storage amount to Rs.216 per dozen. The cost involved in handling each purchase order is Rs.3,000. Price quoted by the supplier is Rs.3,600 per dozen. Required: (a)-Economic order quantity. (b)-Secretary of the club proposes to buy 2,000 dozens tennis balls in each order. Show how much the club can save by buying in economic order quantity.