Reference no: EM132621772
Question - The following information relates to inventory-relationship of M. Ltd;
Annual purchase sh. 1,080,000
Purchase price per unit is sh.30.
Carrying cost is 15% of the purchase price per unit.
Cost per order placed is sh.120.
Desired stock level is 1500 units. This stock level was in hand initially.
Lead time is 7 days.
Required -
i) Compute the economic order quantity.
ii) What is optimal number of orders to be placed in the year?
iii) Assuming 52 weeks in a year, determine the inventory conversion period
iv) Determine the re-order level
v) Assuming that for any orders of at least 1800 units the firm will get 5% discount on the purchase price. Analyze whether the company should take advantage of the discount or not.