# Sandy Lands Ltd carries an item of inventory in respect of which the following data apply: Fixed cost of ordering

## Question:

Fixed cost of ordering per batch £10

Expected steady quarterly volume of sales 3125 unit

Cost of holding one unit in stock for one year 1

(a) Calculate the minimum annual cost of ordering and stocking the item;

(b) Calculate to the nearest whole number of units the optimal batch size if the expected steady quarterly volume of sales:

first falls to 781 units and second rises to 6250 units; and to state the relationship between the rates of change of sales and the optimal batch size;

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