Trade kings limited uses 600,000 tons of salt over a 50 weeks working year. It costs K1,000 to order salt and delivery follows two weeks later. Storage costs for the salt are expected to be K1 per ton per year. The current practice is to order twice a year when the inventory falls to 100,000 tons (all orders are equal in size).

Recommend an ordering policy for Trade Kings limited using the Economic Order Quantity model (5 marks)

Contrast its cost with the cost of the current policy (5 marks)