XYZ Beauty shop requires 12000 units of Shampoos annually as a part of its sales requirement, ordering one month usage at a time. Each shampoos bottle costs Rs 100. The ordering cost per order is Rs 50 and the carrying cost of the average inventory on a yearly basis is 10 % You as an adviser to the company advise to buy the most economical order size.

a. The company looks forward for your advice on understanding the concept of economic order size ???

b. Advise what should be desired quantity as per the economic purchase policy of the company and how much the company may save on account of ordering cost. ???