36. A dealer supplies you the following information with regard to a product dealt with by him:

The dealer is considering the possibility of allowing some back-orders to occur for the product. He has estimated that the annual cost of back-ordering ( allowing shortage of) the product will be Rs 10 per unit.
(i) What is the optimum number of units of the product that he should buy in one lot?
(ii) What quantity of the product should he allow to be back-ordered?
(iii) How much additional cost will he have to incur on inventory ifhe does not permit back-ordering?

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Annual demand Buying cost = 5,000 units = Rs 250 per order Inventory carrying cost 30% per year Price = Rs 100 per unit