Pumpkin Pump Co. uses about 1,50,000 valves per year and the usage is fairly constant at 12,500 valves per month. The valves cost about Rs. 3 per unit when bought in quantities and the carrying cost is estimated to be 20% of average inventory investment on annual basis. The cost to place an order and process the delivery is Rs. 36. It takes 45 days to receive delivery from the date of an order and a safety stock of 6,400 valves is desired.
You are required to determine:
- the most economical order quantity
- frequency of orders and
- the order point
