An alternative approach to determine how much inventory to keep in stock is by adopting the Economic Order Quantity method. Reflecting to past historical data on inventory, the following have been recorded:

• Demand is 200units per annum
• Setup cost set at $10 per order
• Holding Costs is $6 per unit/year
• Annual Working Days is 270.

Q8C.1) Calculate the following to help operation manager in managing the inventory.[0.5marks each]

i) Economic Order Quantity (EOQ) => Q² = 2DS/H

ii) Expected No. Order (N) => N = D/EOQ

iii) Lead Time (L) => L = No. of Annual Working days/ N

iv) Reorder Level (R) => R = (D/ No. of Annual Working days)(L)

Q8C.2) Critically evaluate the importance of the given diagram to an operation manager [3 Marks]

Q8C.3)Briefly discuss the difference between ABC analysis as compared Economic Order Quantity analysis.