# A company's monthly requirement of an inventory item is 1,800 units. The cost of processing an order

## Question:

A company's monthly requirement of an inventory item is 1,800 units. The cost of processing an order is Rs. 5 and the carrying cost per unit is 20 paise. The company supplier agrees to offer the following quantity discounts:

Lead time is 2 days and the company wishes to keep a safety equal to 50% of the usage in the lead time.

(a) Find the economic ordering quantity (EOQ) without considering the offer of discount.

(b) Calculate the re-order point taking 30 working days in a month.

(c) Tabulate different types of cost as also effect of discount on different order sizes taking 1, 2, 3..., 7 orders a month and indicate the EOQ.

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