(b) In a lot size model, average yearly variable cost is given by, K= + Is Q Where, K = Cost per year A = Setting up cos

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B In A Lot Size Model Average Yearly Variable Cost Is Given By K Is Q Where K Cost Per Year A Setting Up Cos 1 (38.72 KiB) Viewed 22 times

(b) In a lot size model, average yearly variable cost is given by, K= + Is Q Where, K = Cost per year A = Setting up cost Q=Lot size I = Inventory cost/ unit/year 1 = Demand units/year s Minimum stock level 2 marks Show the followings. 22A (i) Kis minimum when, Q = (11) Minimum value of K'= 21A1 (III) The variation between K and Q in a graph. 2 marks 2 marks c) Lanka Metal Co. has a contract with Railway to provide 150,000 bushes a year. Lanka Metal Co. orders Metal parts for bushing in lots of 40,000 units from a supplier. It costs Rs.8,000 to place the order and estimated carrying charge is Rs. 30 which is 20% of the unit cost. 1) What will be the optimum order quantity? (ii) What percentage of the order quantity varies from the optimum quantity?