XYZ Ltd carries out ABC analysis and has decided to concentrate on A item, Which total up to the maximum cost of materials. For A class items the following data is available:
Annual requirement = 5000 units
Ordering cost = Rs. 500
Carrying cost = Rs. 20%
Cost per unit = Rs. 80
The company has the following options for purchasing the items.
(i) Place 10 orders of equal size every year.
(ii) Place an order of 1000 units at any time and avail bulk purchase discount of 8%
(iii) Use EOQ
Which options, you think XYZ should follow and why?