At what demand level both options will cost the same

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Reference no: EM133692623

Problem: Inventory Management

A company is trying to decide between using TL (Truck Load) versus LTL (Less than truck load) for ordering a certain item. The item cost is $50 for each unit, the ordering cost is $100/order paid to the supplier, and the holding cost is 20% per year. The trucking cost is $400 for TL with a capacity of 750 units of a truck and $1 per unit for LTL. Should the company use TL or LTL if the annual demand for this item is:

1. 2000 items? (Specify the most economical Q for both options and total cost)
2. 4000 items? (Specify the most economical Q for both options and total cost)
3. At what demand level both options will cost the same.

Reference no: EM133692623

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