Business Studies, asked by Hadeyosola, 11 months ago

A manufacturing company purchase 9000 parts of a machine for its annual requirements ordering for month usage at a time, each part costs N20. The ordering cost per order is N15 and carrying charges are 15% of the average inventory per year. You have been assigned to suggest a more economical purchase policy for the company. What advice you offer and how much would it save the company per year?

Answers

Answered by adventureisland
6

Solution:

Given data are:

Number of lubricants to be purchased, D = 9000 parts per year

Cost of part, Cs= Rs. 20

Procurement cost, C3= Rs. 15 per order

Inventory carrying cost, CI = C1= 15% of average inventory per year

= Rs. 20 × 0.15 = Rs. 3 per each part per year

Then, optimal quantity (EOQ), Q0=  √2C3D

= √C1

Q0=  √2 ×15× 300

= √3

= 300 units

and Optimum order interval, (t0) =

Q0in years

D  =  300

9000  =  1 years

30 =  1 × 365

30 =122 days

Minimum average cost=

=√2C3DC1

=√2 ×3 ×15 ×9000

= Rs. 900

If the company follows the policy of ordering every month, then the annual ordering cost is = Rs 12 × 15 = Rs. 180

Lot size of inventory each month = 9000/12 = 750

Average inventory at any time = Q/2 = 750/2 = 375

Therefore, storage cost at any time = 375 × C1 = 375 × 3 = Rs. 1125

Total annual cost = 1125 + 180 = Rs. 1305

Hence, the company should purchase 300 parts at time interval of 1/30 year instead of ordering 750 parts each month. The net saving of the company will be = Rs. 1305 – Rs. 900 = Rs. 405 per year.

Learn more about economical purchasing policy :

https://brainly.in/question/15347653

https://brainly.in/question/13321990

Similar questions