Suppose you purchase a part from a supplier for a unit cost of $ 4 with which you assemble red widgets. On average, you use 50,000 units of this part each year. Every time you order this particular part, you incur a sizable ordering cost of $ 800 regardless of the number of parts you order. Your cost of capital is 20% per year.
a. How many parts should you purchase each time you place an order?
b. To satisfy annual demand, how many times per year will you place orders for this part?

  • CreatedNovember 06, 2015
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