**EXPERT ANSWER**

*Answer:-*

Annual demand, D = 45*52 = 2340

Unit carrying cost, h = 15% of 130 = $20 per annum

Fixed ordering cost, K = $300 per order.

Optimal order quantity, Q* = (2.D.K / h)^0.5

= (2*2340*300/20) ^ 0.5

= 265 units.

(d)

The optimal order quantity was 265. Multiple of 50, closest to this figure is 250 and 300. Check the total cost for these two figures.

For Q=250,

Total cost = (2340/250)*300 + (250/2)*20

= 2808 + 2500

= 5308

For Q=300,

Total cost = (2340/300)*300 + (300/2)*20

= 2340 + 3000

= 5340

So, Q= 250 is the best choice.

(e)

Unit carrying cost, h = 135 – (5/135*135)

= 135 – 5

= $130 / case

H = 15 /135 *130

H = $14.44

Q = 1000

Total cost = (2340/1000)*300 + (1000/2)*14.44

= 702 + 7220

Total Cost = $7922.