Question

Sinar Mutiara Sdn Bhd produces a variety of watches. One of the components used in making the watch is XM leather which obtains from Korean supplier at the cost of RM50 per unit. The monthly usage of XM Leather is 200 units. The company decided to limit the number of orders to two times per annum to minimise its total cost. The following data is made available:

• Delivery cost is RM125 per order.

• Administration cost is RM20 per order.

Storage cost for keeping the leather properly and to ensure its quality is RM5.00 per unit.

• Insurance and security fees are RM2.00 per unit.

• Interest charges is estimated at 5% of the purchase's price.

Required:

i) Calculate ordering cost per order,

ii. Calculate holding cost per unit,

ii. Tabulate the relevant total cost of XM leather for the number of orders of 2, 4 ,6 and 8 times per year,

iv. Based on your answer in B(iii), determine the economic order quantity (EOQ) that minimises the total cost.

Answer 1

thanks

please upvote