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economic order quantity

Syarikat GU Sdn. Bhd. produces a product which has a constant monthly demand of 4000 units. The product requires a component which Syarikat GU Sdn. Bhd. purchases from a supplier at RM10 per unit. The component requires a three-day lead time from the date of order to the date of delivery. The ordering cost is RM0.60 per order and the holding cost is 10% per annum.

 

You are required to:

 

(a)  (i)   Compute the economic order quantity                                            

          (ii)  Compute the number of orders required per year.     

     (iii)   Compute the total cost of ordering and holding the components for the year.                                                                                                    

 

(b) Assuming that there is no safety stock and that the present stock level is 400 components, when should the next order be placed? (Assume a 360-day year.)        


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