Question Five Pink Ltd. sells a Product Exe with sales occurring evenly throughout the year. The annual demand for Product Exe is 30,000 units and an order for new inventory is placed each month. Each order costs KES 4,000 to place. The cost of holding Product Exe in inventory is KES 15 per unit per year. Buffer (safety) inventory equal to 40% of one months sales is maintained.

Required: Calculate the following values for Product Exe:

i. The total cost of the current ordering policy.

ii. The total cost of an ordering policy using the economic order quantity.

iii. The net cost or saving of introducing an ordering policy using the economic order quantity.