Question 1

(a) Describe the costs associated with inventory control and explain the significance of the Economic Order Quantity. (10 marks)

(b) ABC Ltd. Uses EOQ logic to determine the order quantity for its various components and is planning its orders. The annual consumption is 80,000 units. The cost to place one order is 1200 and cost per unit is 50 while carrying cost is 6% of unit cost. Find:

(i) EOQ

(ii) Number of orders per cycle

(iii) Ordering cost

(iv) Carrying cost

(v) Total cost of inventory (3 marks each= 15 marks)

(Total 25 marks)

Question 2

	W1	W2	W3	SUPPLY
F1	5	4	3	100
F2	8	4	3	300
F3	9	7	5	300
DEMAND	300	200	200

(a) Find the minimum cost associated with this transportation problem using the North west corner method. (15 marks)

(b) Apply the optimality test and determine the optimal cost. (10 marks)