Question 2 (25 marks) Pena Ltd is a business in a construction industry. It buys...
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Question 2 (25 marks) Pena Ltd is a business in a construction industry. It buys materials from a supplier at a price of N$ 250 per unit of materials ordered. The annual demand is 10 000 units. Pena's inventory cost is 25% of average inventory per year. Pena incurs N$2 000 each time an order is placed with the supplier Required: a) Estimate (using a table format) the annual carrying costs, ordering costs, average inventory costs and total inventory costs associated with placing one order, five orders, 10 orders, 15 orders and 20 orders annually. Also indicate the order size in units for each number of orders. (15 marks) b) Plot a graph of costs in N$ (y-axis) versus the size of order in units (x-axis) and plot the appropriate information from (a) above. Estimate the Economic Order Quantity (EOQ) from your graph. (7 marks) c) Use the EOQ to calculate the economic order quantity for Pena Ltd
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