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A manufacturing set-up has an expected usage of 50,000 units of a certain product during the next year. The cost of processing an order is $ 20 and the carrying cost per unit is $ 0.50 for one year. Lead time on an order is 5 days and the company will keep a reserve supply of 2 days usage. One is required to calculate:
a) the economic order quantity
b) the reorder point (assume 250-day year)
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The firm incurs fixed operating costs of $30,000 and variable operating costs of $12 per unit. What is Chico's degree of operating leverage (DOL) at a base level of sales of 15,000 units?
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