Question

SR Ltd. is reviewing its purchase policy with regard to the purchase of an important
material. You are given the following information:
(i) Annual Demand: 10,000 Kg.
(ii) Ordering cost: Rs. 500 per order
(iii) Price per Kg.:Rs. 200
(iv) Stock holding cost: 20%
The purchase manager wants to purchase the entire annual requirement in 5 orders of equal
quantity. Work out the gain or loss to the organization due to his ordering policy.

Answer 1

Explanation:

SR Ltd. is reviewing its purchase policy with regard to the purchase of an important

material. You are given the following information:

(i) Annual Demand: 10,000 Kg.

(ii) Ordering cost: Rs. 500 per order

(iii) Price per Kg.:Rs. 200

(iv) Stock holding cost: 20%

The purchase manager wants to purchase the entire annual requirement in 5 orders of equal

quantity. Work out the gain or loss to the organization due to his ordering policy.