problem1. A stockist of a particular commodity makes a profit of Rs 30 on each sale made within the same week of purchase; otherwise he incurs a loss of Rs 30 on each item. The data on the past sales are given below:
No. Of items sold in week

5

6

7

8

9

10

11

Frequency

0

9

12

24

9

6

0

a) Compute the optimum number of items the stockist should purchase every week in order to maximize the profit.
b) Compute the expected value of perfect information.
problem2. A company uses components at the rate of 500 a month which are bought at the cost of £1.20 each from the supplier. It costs £ 20 each time to place an order, regardless of the quantity ordered. The total holding cost is made up of the capital cost of 10% per annum of the value of stock plus 3p per item per annum for insurance plus 6p per item per annum for storage plus 3p per item for deterioration.
If the lead time is zero, determine:
a) The number of components the company should order
b) The frequency of ordering
c) The total annual cost of the inventory