3 7. Higley Radio Components Company has a product for which the assumptions of the inventory model with backorders are valid. information obtained by the company is as follows:

Calculate (i) economic order quantity; (ii) maximum stock level; (iii) maximum number of units back-ordered; and (iv) total relevant cost per annum.
If the company decides to prohibit backorders and adopts the regular EOQ model, what effect will it have on order quantity; maximum sotck level and total relevant cost?
(M Com, Delhi, 2009)

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Inventory carrying charge = 20 percent per annum Units cost = Rs 50 Ordering cost Rs 250 per order = Backorder cost Rs 30 per unit per year