The demand of an item is 600 units per year. Each item costs Ksh 50 and ordering

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Question:

The demand of an item is 600 units per year. Each item costs Ksh 50 and ordering cost is Ksh 5. If the shortage cost is Ksh 1 per month per item and inventory holding cost is 20%, find
i. Optimum order quantity.[2 marks]
ii. Number of orders.[2 marks]

(c) A chemical manufacturer processes two chemicals A and B in varied proportions to produce three products P1, P2 and P3. He wishes to produce at least 150 units of P1, 200 units of P? and 60 units of P3. Each ton of A produces 3 units ofP1, 5 units of P2 and 3 units of P3 while that of B produces 5 units of P1, 5 units of P2 and 1 unit of P3. The cost per ton of products A and B are Ksh 400 and Ksh 500 respectively. Formulate an LP problem and solve it using simplex method if the manufacturer wishes to minimize the cost. [6 marks]