QUESTION THREE $[10]$

$3\mathrm{.}1$ Explain the meaning of the term economic order quantity $($EOQ$)$ and explain the significance of calculating this value. $(2)$

$3\mathrm{.}2$ A company that sells spares for the motor and taxi industry runs a mail$-$order

business for taxi headlights. Annual demand for the headlights is $8000$ units. The annual holding cost per unit is R$300$ and the cost to place an order is R$80.$

Calculate the EOQ. $(3)$

$2$

$3\mathrm{.}3$ Given the following information:

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Normal usage or average requirement: $800$ units per day

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Maximum usage: $1000$ units per day

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Minimum usage: $600$ units per day

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Re$-$order period: One month $(30$ days$)$

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Time required to receive emergency supplies: $5$ days

Calculate each of the following:

$3\mathrm{.}3\mathrm{.}1$ Ordering point $(3)$

$3\mathrm{.}3\mathrm{.}2$ Minimum limit$/$level $(2)$