QUESTION 3.

A manufacturing company forecast that it is likely to sell 6,00,000 units for the year 2021. The processing cost of an order is Rs. 150 and the carrying cost per unit of inventory is Rs. 12. The lead time of an order is 8 days

a. What would be the economic order quantity (EOQ) and re-order point assuming 300 days in a year. (5 Marks)

b. The company implements business process reengineering which results in to reduction of 20% in cost of an order, 10% in carrying cost per unit of inventory and 25% in lead time of an order. What would be the new EOQ and re-order point. (5 Marks)