Question

Imtiaz Super Store sells Blue Band Margarines. Its annual demand is 108,500 units. The shop incurs ordering cost of Rs 650/= order, irrespective of the order size. They buy it at Rs 150 per unit. The carrying cost is 12% on average inventory investment plus rent, insurance, property tax, and supervision for each unit is Rs 3. The maximum sale per day is 360 units. It takes 5 days to receive these items from supplier after placement of order quantities. The annual working days of Store are 350 days.

Required:

i.Determine the Economic order quantities (EOQ)

ii.Determine Safety stock maximum.

iii.Determine Reorder point levels

iv.Total annual inventory cost (Total annual ordering cost and total annual carrying cost)

v.A Supplier offers 1% discount to Imtiaz Supper Store, if they purchase the goods at least at 10,000 units at a time instead of above EOQ level (Part-i). Should they accept this offer? Please advice to management with relevant comparative workings.

vi.Why Economic order quantities may be wrong some time for any particular item to purchase in a given situation?

Note: kindly show every step