20.

(a) In respect of a component costing Rs 10 each, the annual demand is known to be 5,000 units. The cost of placing an order is Rs 200 and the total holding cost is 20% of the average inventory investment.

Determine,

(i) the most economical order size,

(ii) the optimal number of orders during a Year,

(iii) the cost of this policy exclusive of the component cost.

b) A supplier is willing to supply this component and prepared to give discount as follows:
For ordering at least 1,800, 2,000 and 2,400 units a discount of0.5, 1 and 1.5%, respectively.
Assuming that the carrying cost per unit would not change because of the discount offered, what is the most economical quantity that should be ordered?