Daata Waaly Autos is a distributor of air filters to retail stores in Burewala. It buys its filters from several manufacturers. Filters are ordered in lot sizes of 1,000, and each order costs Rs.40 to place. Demand from retail stores is 20,000 filters per month, and carrying cost is Rs.0.10 a filter per month.

Requirements:

a. What is the optimal order quantity with respect to so many lot sizes (that is, what multiple of 1,000 units should be ordered)?

b. What would be the optimal order quantity if the carrying cost were cut in half to Rs.0.05 a filter per month?

c. What would be the optimal order quantity if ordering costs were reduced to Rs.10 per order?

d.why this Optimal order quantity or EOQ is better for Daata waly Auto? What will happen if they order more or less than this quantity?