Answer to Question #66021 in Economics of Enterprise for Hassan

Question

A Company uses 2,500 units during the course of the year, and its usage is relatively constant throughout the year. These units are purchased from a supplier 100 kilometers away for Ksh.15 each, and the lead time is 2 days. The holding cost per unit per year is Ksh.1.50 (or 10% of unit cost) and the ordering cost per order is Ksh.18.75. There are 250 working days per year for this company.
a) What is EOQ?
b) Given the EOQ, what is the average inventory?
c) In minimizing cost, how many orders would be made each year? What would be the annual ordering cost?
d) Given the EOQ, what is the total annual inventory cost ( including purchase cost)
e) What is the time between orders?
f) What is the ROP(re-oder point)