QUESTION TWO Steelecon Bhd is a mechanical engineering company that has become a reputable leading company in the mechanical and general engineering work. The company is known for its high quality professional work, its reliability and its level of services. Steelecon Bhd's current policy to order 11,000 mechanical components for next year when inventory level drops to a certain level. It is forecasted that the demand requirements to meet its production target is 352,055 components. The cost of placing an order is estimated at RM62, the company has to incur a holding cost of RM0.30 per component per year in the warehouse. The demand, ordering and holding costs are expected to remain constant during next year. REQUIRED: Using the formulae below and any other formulae that you might need: a. Calculate the annual order cost, holding cost and total cost for both current and EOQ holding policy. Comment on the differences on the annual inventory management costs. ( 20 Marks ] b. If the reorder level is 4,200 components, with a lead time of four days and the average usage per day is 965 components, calculate the revised minimum inventory level holding costs if the EOQ ordering policy is applied. [ 5 Marks ] Annual Order Cost = Fixed Cost per order * Number of orders Holding Cost = Average holding cost per unit p.a. * Average stock level EOQ SQUARE ROOT OF {(2 X Fixed Ordering Costs * Total Sales Next Year) } {Storage Cost per unit p.a. } [ 25 Marks ] Type in your answer here: Page 1