The company requests your advice on how to reduce inventory expenses for its coffee shop. The annual demand of fresh milk (boxes of 6 litres) = 750 units, delivered purchase cost = R35/units, Annual carrying cost percentage= 25 percent, Order cost = R50/order. The lead time is 10 working days. Assuming 20 working days per month.

4.1 Determine the Economic Order Quantity (4 marks)

4.2 Determine the reorder point (4 marks)

4.3 Determine the average inventory (4 marks)

4.4 Suppose orders are placed only at review time. Find the optimal period and the optimal order quantity. (8 marks)

Formula sheet TC=RC+QRS+2QKCEOQ=KC2RS P=Lx Daily demand T=RKC2S Where, R= annual demand, C= delivered purchase cost, K= annual carrying cost percentage, S= order cost, L= The lead time, P= the reorder point, EOQ=Economic Order Quantity, T= the optimum order period... Formula sheet TC=RC+QRS+2QKCEOQ=KC2RS P=Lx Daily demand T=RKC2S Where, R= annual demand, C= delivered purchase cost, K= annual carrying cost percentage, S= order cost, L= The lead time, P= the reorder point, EOQ=Economic Order Quantity, T= the optimum order period