Q.1 The Gulf Automotive Co. uses 6 spark plug per day in one of its service stations. The company operates on 5 days a week over 45 weeks per year. Each time the company orders the spark plugs boxes, the total expenses incurred to the company are estimated to be 14 OMR per order. Presently the company orders 50 boxes of sparkplugs (5 spark plugs per box) per order at a flat rate of 34 OMR per box. It takes almost one and half-day for the supplier to deliver the order. Considering the overall cost of the inventory and the manpower involved, the annual holding costs for the company is estimated to be 35% of the cost for each box unit price. (1) Is the present purchase policy economical for the company? If not, guide the purchase manager in selecting the best economical strategy in terms of the expected number of orders annually, ordered quantity per order, reorder point and the expected time between the orders, for ordering the spark plugs. [10] [10] (II) The supplier has decided to offer discounts on the higher-order quantity supplied in boxes (5 spark plugs per box) as shown in Table 1: In this case, estimate the optimum order quantity that the company should order to minimize the total inventory cost Table 1 : Discount Rates Number Price in OMR per box of boxes (5 spark plugs per box) 1 to 39 34 40 to 44 32.75 45 to 50 31.5 > 50 30.5