What order size will give variable cost

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Reference no: EM131791997

1. A company is introducing a new item and it has forecast likely demand next year as between 100 and 130 units. The costs are uncertain, but the reorder cost is somewhere between $50 and $70, and the holding cost is between 20 per cent and 25 per cent of unit cost a year. If the unit cost is $200, what can you say about the order size?

2. Demand for an item is constant at 1,000 units a year. Unit cost is £50, reorder cost is £100, holding cost is 25 per cent of value a year and no shortages are allowed. Describe an optimal inventory policy for the item. What order size will give a variable cost within 10 per cent of optimal? What is the cost if suppliers only make deliveries of 200 units?

Reference no: EM131791997

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