The eThekwini Municipality 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 $=$

R$35/$units$,$ Annual carrying cost percentage $=25$ percent, Order cost $=$ R$50/$order$.$ The lead time is $10$

working days. Assuming $20$ working days per month.

$4\mathrm{.}3$ Determine the average inventory $(4$ marks$)$

$4\mathrm{.}4$ Suppose orders are placed only at review time. Find the optimal period and the optimal order

quantity. $(8$ marks$)$

Formula sheet

$TC=RC+\frac{BS}{Q}+\frac{\text{O}\text{R}\text{C}}{2}$

EOQ$=\sqrt[\phantom{2}]{\frac{2RS}{KC}}$

$P=L$ Daily demand

$T=\sqrt[\phantom{2}]{\frac{2S}{RKC}}$

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...