Sandy Lands Ltd carries an item of inventory in respect of which the following data apply:
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;