Answer Happy

QUESTION TWO a) In the context of Inventory Management, let TIC = the total inventory Cost, THC=the total holding cost, TOC-the total order cost and TPP the total purchase price. Given that Q=is the order quantity every time an order is placed, Co the order cost per unit, Ch the holding cost per unit, Cu the unit price and D the total demand. Given that TIC-THC+TOC+TPP write an expression of for TIC in terms of Q (4Marks) b) Using the method familiar to you and the TIC expression in (a) above show that the EDC ('L Economic Order Quantity is given by (6 Marks) c) Assume you have a product whose annual demand is 720 units, holding cost per item per year is Ksh 80 and Order cost is Ksh.120, Determine the Economic Order Quantity (EOQ) and hence the optimal Number of Orders (4 Marks) d) A firm wishes to invest either in Apartment Buildings, Office Space or Warehouses countrywide. To enable them to decide they have considered the likelihood of the following market condition Recession (30%) , Boom (25%) and Decline (45%). The Table below shows the payoff due to each decision alternative under specific market condition Market Condition Purchase Decision Recession Boom Normal Apartment -50,000 125,000 24,000 Buildings Office Space 25,000 75,0000 45,000 Warehouses 15,000 20,000 35,000 Advice the firm on the option they should invest in under each the following decision-making criteria (0) Maximax criteria (ii) Maximin criteria (iii) The Expected Value criteria (iv) Minimize Regret: (Savag's Opportunity Loss) criteria