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A precision engineering company consumes 50000 units of a

Problem 8.9.

A precision engineering company consumes 50,000 units of a component per year. The ordering, receiving and handling costs are Rs.3/- per order, while the trucking cost are Rs. 12/- per order. Further details are as follows: Interest cost Rs. 0.06 per units per year. Deterioration and obsolescence cost Rs.0.004 per unit per year. Storage cost Rs. 1000/- per year for 50,000 units. Calculate the economic order quantity,Total inventory carrying cost and optimal replacement period.

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