Answer to Question #348095 in Management for Mela

Question

8. 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.