Reference no: EM132896301

XYZ Limited wishes to achieve excellent stock management so as to achieve a marvelous profit this year. Its management estimates the demand for its products to be 1000 units per annum, with a purchase price of shs.10 per unit, a holding cost of shs.0.75 per unit and ordering cot of shs.15 per order. The supplier of the stocks has presented XYZ with the following range of prices of the stocks:

Orders size (in units) Quantity Discount % Price per Unit (Shs)

0 - 99 0 10
100 - 199 1 9.90
200 - 399 2 9.80
400 - 599 4 9.60
600 - 799 5 9.50
800 - 899 5 9.50
900 - 999 5.5 9.45

Due to its storage capacity, the company can only purchase an amount of up to 600 units. Currently, the company is purchasing at optimum stock quantity to enable it achieve its objectives. The management is considering whether to shift from the current stock purchase policy to purchase the maximum stocks.

Required;

a) Calculate the current EOQ in units.

b) Determine the total costs of stocks that arise due to the EOQ purchased (include the discount opportunity costs).

c) Advise the company whether it should change its policy.