Minimize their total inventory cost of this item

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A firm seeks to minimize its inventory cost. They use 2,520 of these items each year. The item costs $200, and has a inventory carrying cost of 5 percent. It costs them $79.37 to place an order for more of this item. Assume there are 360 days in one year. It normally takes seven days to receive an order after it is placed.

Determine how much they should order each time they place an order so they can minimize their total inventory cost of this item.

When should they reorder more of this item to be sure to be sure they do not run out of it?

Reference no: EM131738127

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