Question 2

Wira Maju Limited has been buying a certain material item in order sizes 2,400 units. The total

annual requirement of the item is 4,800 units. Material cost per unit is RM10; cost of ordering is

RM8 per order and storage cost works out to be 20% of the average stock value.

You are required to find:

(a) the economic order quantity,

(b) the number of orders to be placed a year, and

(c) the cost savings per year.