Answer:
a) Optimal order Quantity =4,472.13 pounds
<em>b) No of times order per year= </em> 12 times in a years i.e once in a month
<em>c) Annual Holding cost = </em>$1207.47
<em>d) Ordering cost per annum = </em>$1207.47
Explanation:
Total annual demand = 3000 ×3 × 12 × 0.5 pounds= 54,000 pounds
Ordering cost per order = 100
Holding cost per order = 20%× (2.5+0.2) = 0.54
Optimal order Quantity = √(2× 100×54000)/0.54
=4,472.13 pounds
<em>No of times order per year</em>
= 54,000/4472.13 = 12 times in a years
that is, once per month.
<em>Annual Holding cost</em>
= Holding cost per unit annum × Average inventory
= 0.54 × 1/2 × 4,472.135 = $1207.47
<em>Ordering cost per annum</em>
=Annual demand/order quantity × ordering cost per order
= 54,000/4472.13 × 100 = $1207.47