Calculate the economic order quantity

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Reference no: EM132149

QUESTION

(a) With reference to examples, discuss the concept of P: D ratio and its utility in operations management

(b) Discuss the essential conditions to be present for the successful implementation of Just-in-time stock management system in an organisation

(c) A company requires a part X at the rate of 1000 units per week. Each unit costs Rs. 50 when purchased from the current supplier. The ordering cost associated with placing an order with the current supplier is Rs. 300. The interest rate is assumed to be 10% per year and the warehousing costs associated with storage and maintenance are Rs 10 per unit per year

(i) Calculate the Economic Order Quantity

(ii) Your current supplier is prepared to give you three options for ordering-

- You continue as at present with the EOQ; or

- You can have a 5 percent reduction in the unit price if you order at least 10,000 units per order; or

- You can have a 10% reduction in the unit price if you order at least 30,000 units in each order

Which of these options would you recommend? Give your reasons

Reference no: EM132149

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