QUESTION FOUR

a$)$ Determine the economic order quantity and the annual total cost for a product whose average daily consumption rate is $80$ units. The cost of each unit is K$0\mathrm{.}50$ and the inventory carrying charges is $K0\mathrm{.}20.$ The cost of placing and receiving the order is K$10.$ Assuming total working days in a year as $300.$

$[8$ marks$]$

b$)$ A plant operates $5$ days a week, $52$ weeks a year, and can produce at $65$ units per day. The setup cost for production run is K$450\mathrm{.}00.$ The cost of holding inventory is $K5\mathrm{.}00$ per unit per year. The annual demand for this product is $5000$ units.

i$)$ What is the EPQ?

$[5$ marks$]$

ii$)$ What is the total annual cost of inventory and set up if the batch size $(Q)$ is $900$ units?

$[5$ marks$]$

iii$)$ What is the number of set ups per year if the lot size $(Q)$ is $1800$ units?

$[2$ marks$]$