The following relates to inventory costs for ABC Ltd
- Orders must be placed in multiples of 200 units.
- Requirements for the year are 4,00,000 units.
- The purchase price per unit is Rs. 4.
- The carrying cost is 20% of the purchase price of goods.
- Cost per order placed is Rs. 25.
- Desired safety stock is 20,000 units. This quantity is on hand initially.
- Three days are required for delivery.
Calculate:
- EOQ
- How many orders the company place each year?
- At what inventory level should an order be placed?