ABC hardware supply Co. stocks thousands of hardware items and sell it to plumbers, contractors and the retailers. The manager is presently using rules of thumb to stock the items. He wanders how much he will be able to save annually if EOQ were used. He instructed Uma Sen an inventory analyst to conduct an analysis of one material only ( material # 3925 a brass valve) to see if significant saving is there from using EOQ. Uma Sen developed the following estimates from accounting information: D = 10, 000 valves per year Q = 400Valves per order (present order quantity) C = 0.40 Rs per valve per year S=Rs 5.50| per order Determine annual savings from the item and conclude.
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