Answer to Question #344237 in Management for jovani

Question

1.The demand for a certain product is random. It has been estimated that the monthly demand of the product has a normal distribution with a mend of 390units. The unit price of product is ETB 25. Ordering cost is ETB 40 per order and inventory carrying cost is estimated to be 35 percent per year. Calculate economic order quantity (EOQ).  

2. A company has found that its cost to purchase a component is ETB 50 per order and the carrying cost is 10% of the average inventory. The company currently purchases ETB 20,000 worth of components in a year. Assuming that same demand will be there in the next year,  

a. Suggest a suitable policy of purchase in terms of no. of orders in a year and 

b. Quantity to be ordered for each year. Assuming fractional order can be made.