Q.3. A Company has estimates that 36,000 Ring Binders Will be needed next year. The binders have been ordered as needed, a procedure, which has not proved satisfactory. The cost of binder ordered in 100-units lots or more is Rs. 1.25 each. The cost department estimates a cost of Rs.5.60 to place and process and order, further calculations indicate that it costs about 12% of average inventory cost to carry the inventory. The purchasing department believes that the practical limits for ordering binders would be maximum of 45 and minimum of 10 orders a year. Required: a. A table indicating the most economical order quantity b. The difference in the most order quantity if the earning cost is 20% of average inventory.

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