Q4This year, Nariya Ltd. is expecting a 10% reduction in demand for the tyres manufactured at its local plant due to the current economic situation. Last year, the local plant produced and sold 58,000 tyres. Order size is 200 tyres per order. It was expected that the order size would remain the same in the current year as last year. Direct labour cost is expected to reduce by 8% during the year, while variable overhead costs and inspection cost are expected increase by 12% and 9% respectively during the current year. The last year Nariya Ltd. incurred the following costs to process the orders:

Order Processing Costs

Cost in $

Inspection cost

22,000

Direct labour cost

56,000

Variable overhead costs

43,000

The following costs are expected to be incurred during the current year: insurance on the inventory $2.50 per tyre and other storage costs - $1.95 per tyre.

4a) 10 Marks Calculate the economic order quantity for the current year.