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Question

XP Ltd. is a manufacturing company with high stock requirements. Management

are currently considering their stockholding policy.


The following information is available for one stock item, material X153, which has a value of TZS1000 per kilo:
Maximum Minimum
Weekly demand 2,000 kilos 1,600 kilos
Lead time 16 days 10 days


The company works a five-day week for 50 weeks per annum. The cost of placing an order is TZS9000 and the holding cost is estimated at 10% of stock value.


Required:
a) You are required to calculate the maximum level, the minimum level, the re-order level, and the economic order quantity for material X153.

Step-by-step answer

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