Item X is a standard item stocked in a company’s inventory of component parts. Each year the Firm, on a random basis, uses about 2,000 of item X, which costs $ 25 each. Storage costs, which include insurance and cost of capital, amount to $ 5 per unit of average inventory. Every time an order is placed for more of item X, it costs $ 10.
a. Whenever item X is ordered, what should the order size be?
b. What is the annual cost for ordering item X?
c. What is the annual cost for storing item X?

  • CreatedApril 09, 2014
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