QUESTION $4$

$4\mathrm{.}1$ Use the information provided below to answer the following question.

$(20$ Marks$)$

INFORMATION:

SOS Group of Hospitals $($SOSGH$)$ dispenses $360000$ packets of a specific medicine to patients annually. SOSGH procures the medicine in six equal instalments from the supplier, at a cost of R$500$ per packet. The cost per order is R$2500.$ Upon receiving the medicine from the supplier, SOSGH incurs additional expenses to hold and maintain it in the hospital pharmacy. The holding cost per packet per year amounts to $10\%$ of the unit purchase price.

REQUIRED:

$4\mathrm{.}1\mathrm{.}1$ Compute the economic order quantity $($EOQ$)$ of the packets of medicine.

$(3$Marks$)$

$4\mathrm{.}1\mathrm{.}2$ Based on the ordering policy stated above, compute the total annual ordering and holding cosls of the

$(3$ Marks$)$

medicine.

$4\mathrm{.}1\mathrm{.}3$ How much money can SOSGH save by replacing the existing inventory policy with the economic order

$(5$Marks$)$

quantity $($EOQ$)$ model?