The following information relates to inventory-relationship of M. Ltd;

Annual purchase sh.1,080,000

Purchase price per unit is sh.30.

Carrying cost is 15% of the purchase price per unit.

Cost per order placed is sh.120.

Desired stock level is 1500 units.This stock level was in hand initially.

Lead time is 7 days.

Required:

i) Compute the economic order quantity. (2 Marks)

ii) What is optimal number of orders to be placed in the year? (2 Marks)

iii) Assuming 52 weeks in a year, determine the inventory conversion period

(2 Marks)

iv)Determine the re-order level (2 Marks)

v)Assuming that for any orders of at least 1800 units the firm will get 5% discount on the purchase price. Analyze whether the company should take advantage of the discount or not.