Week $6$: Economic Ordering Quantity

The annual requirements for a particular raw material are $2,000$ units costing Re$.1$ each to the manufacturer. The ordering cost is Rs$.10$ per order and the carrying cost $16\%$ per annum of the average inventory value.

Based on the above

Find and explain the economic order quantity and the total inventory cost per annum.

The costs of placing an order are Rs$.150$ per order. It is estimated that $1000$ units will be used in the next $12$ months. The carrying cost per month is Rs$.2\mathrm{.}50.$ Assuming that the demand is deterministic and continuous and that no stock$-$outs are allowed, determine the optimal order quantity.

$2.$ Based on the above, explain the following

What is the time between the placing of orders?

The procurement lead time is one month.

What is the re$-$order point based on the on$-$hand inventory level?