The yearly production of a company's product which has a steady demand of 40,000 units. Each...

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The yearly production of a company's product which has a steady demand of 40,000 units. Each unit of the finished product needs 1 kg of Raw Material. The cost of placing one order for Raw material is Rs. 1000/-and the inventory carrying cost is Rs. 20/- p.a. The lead time for procurement is 36 days and a safety stock of 1000 kgs of raw material is held by the company. The company has been able to negotiate the following discount structure with the vendor. Order Quantity Discount(Rs.) Upto 6000 NIL 6001-8000 4000 8001-16000 20000 16001-30000 32000 30001-40000 40000 Cost of Raw Material is Rs. 8/kg. You are required to calculate: Calculate the re-order point considering 30 days in a month Show a statement showing total cost of inventory if the number of orders is one, four or five in a year. State the number of orders that the company should place to minimise its cost considering EOQ. The yearly production of a company's product which has a steady demand of 40,000 units. Each unit of the finished product needs 1 kg of Raw Material. The cost of placing one order for Raw material is Rs. 1000/-and the inventory carrying cost is Rs. 20/- p.a. The lead time for procurement is 36 days and a safety stock of 1000 kgs of raw material is held by the company. The company has been able to negotiate the following discount structure with the vendor. Order Quantity Discount(Rs.) Upto 6000 NIL 6001-8000 4000 8001-16000 20000 16001-30000 32000 30001-40000 40000 Cost of Raw Material is Rs. 8/kg. You are required to calculate: Calculate the re-order point considering 30 days in a month Show a statement showing total cost of inventory if the number of orders is one, four or five in a year. State the number of orders that the company should place to minimise its cost considering EOQ.

Answer rating: 100% (QA)

To calculate the reorder point ROP we need to consider the lead time demand and safety stock The lead time demand is the average demand during the lea... View the full answer