QUESTION $2(20$ Marks$)$

Mact Manufacturing, a firm specializing in eco$-$friendly home appliances, has been experiencing issues with inventory

management. The company currently holds large quantities of raw materials and finished products in its warehouses,

leading to high carrying costs and occasional stockouts of critical components. The operations manager Allen Redfurn has

outlined that the organisation has been purchasing scrum a major raw material in batches of $960$ units, which equates to a

quarterly supply. The cost of scrum per unit has been estimated to be R$14,$ the cost of placing and managing an order R$18$

and the carrying costs are estimated to be $25\%$ of the purchase cost. In addition, the firm for most of its supplies uses

fredish a copper pipe as a primary raw material. The manufacturing demand for this pipe is approximately normal,

averaging $20$ units per week, with a standard deviation of $6$ units per week. Cost per unit is estimated to be R$24$ ordering

costs are R$25$ per order$$ inventory handling cost is R$4\mathrm{.}00$ per unit per year. Acquisition lead time is four weeks. The

company works $50,5-$day weeks per year. The manager is determined to address any inefficiencies associated with

inventory management and is therefore looking to adopt a more efficient inventory ordering model.

$2\mathrm{.}1$ Advise the operations manager on the total cost that can be potentially saved annually from procuring

scrum using the EOQ model. Provide the relevant calculations for your response and in$-$text source referencing.

$(15$

marks$)$

$2\mathrm{.}2$ Advise the operations manager on the optimal size of the pipe order, if minimisation of inventory system cost is the objective.

$(5$

marks