Question 10.7 The Megagate Company is a restaurant supplier which sells a number of products to various restaurants in the area. One of their products is a special meat cutter with disposable blade The blades are sold in packages of 12 blades for N1,600. After a number of years it has been determined that the demand for the replacement blades is at a constant rate of 2,000 packages per month. The packages cost the Megagate Company N800 each from the manufacturer and require a three-day lead-time from date of order to date of delivery. The ordering cost is N96 per order and the carrying cost is 10 per cent annum. a) Calculate: [i] The economic order quantity [ii] The number of orders needed per year. [iii] The total cost of buying and carrying blades for the year. (9 Marks) Assuming that there is no Safety Stock and that the present inventory level is 200 packages, when should the next order is placed? (Use 360 days for one year) (3 Marks) b) L Discuss the problems that most firms would have in attempting to apply this model to ICAN (May 2004) MA their inventory problems. (2 Marks) (Total 14 Marks)