Optimal inventory policy relative to this toilet seat

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Reference no: EM132245633

Dingbat Manufacturing, Inc. (DMI) makes designer toilet seats. The demand for a particular model is constant at a rate of 2,000 per month. DMI has the capacity to manufacture the seats at a rate of up to 2,500 per month in its own plant, and can subcontract the manufacture of up to 1,000 per month with Clean Seat Fabricators, Inc. (CSF). DMI's manufacturing costs for a production run are $200.00 to set up the production line, and a variable cost of $2.00 per unit. The batch costs of subcontracting to CSF are $30.00 for the administrative and contracting costs, and a purchase price of $2.25 per unit. DMI uses 0.20 as an annual inventory carrying cost rate. What is DMI's optimal inventory policy relative to this toilet seat?

Reference no: EM132245633

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