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ABC Limited produces a product which has a monthly demand of 52,000 units. The product
requires a Component P which is purchased at Rs. 15 per unit. For every finished product, 2
units of Component P are required. The ordering cost is Rs. 350 per order and the carrying cost
is 12% p.a.
Required:
(i) Calculate the economic order quantity for Component P.
(ii) If the minimum lot size to be supplied is 52,000 unis, what is the extra cost, the company
has to incur?
(iii) What is the minimum carrying cost, The company has to incur?

Ap

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