The  annual requirements for a particular raw material are 2,000 units  costing Re. 1 each to the manufacturer. The ordering cost is Rs. 10 per  order and the carrying cost 16% per annum of the average inventory  value.

 1. Based on the above 

Find and explain the economic order quantity and the total inventory cost per annum.

The  costs of placing an order are Rs. 150 per order. It is estimated that  1000 units will be used in the next 12 months. The carrying cost per  month is Rs. 2.50. Assuming that the demand is deterministic and  continuous and that no stock-outs are allowed, determine the optimal order quantity.

2. Based on the above, explain the following

 What is the time between the placing of orders? 

The procurement lead time is one month. 

What is the re-order point based on the on-hand inventory level?