A product requires 40 types of material every day for its manufacturing. A fixed cost of ₹50 per order is incurred for placing an order. The inventory carrying cost for each material is ₹0.02 per day. The lead period is

(i) Economic Order Quantity (EOQ): Annual Consumption (A) = 40 types of material x 365 days = 14,600 types of material Fixed Cost per order or ordering cost (O) = ₹50 Carrying Cost (C) = ₹0.02 x 365 days = ₹7.30 EOQ = √(2AO/C) = √(2 x 14,600 x 50 / 7.30) = √(1,460,000 / 7.30) = √200,000 = 447.21 units (approx) (ii) Re-order Level (ROL): Re-order level (ROL) = Maximum Usage per day x lead time = 40 types of material per day x 50 days = 2,000 types of material