What weekly holding cost rate does the lot size imply

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A company produces plastic powder in lots of 2000 pounds at the beginning of each week. The company uses the powder in an injection moulding process at the steady rate of 50 pounds per hour for an eight-hour day, five days a week. The manager has indicated that the cost of placing an order is $100, but “we really have not determined what the holding cost is”. (1) What weekly holding cost rate does the lot size imply, assuming the lot size 2000 is optimal? (2) Suppose the figure you compute for weekly holding cost rate has been shown to the manager, and the manager says that it is not that high. Would that mean the lot size 2000 is too large or too small? Explain in at most two sentences.

Reference no: EM132138441

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