A company dealing in one item has a total demand of 120,000 sets per year. The company can buy from two sources with the following conditions:

Source A: Total production and supply capacity is 600,000 sets per year. Supply is in batches with regular intensity. The cost per order is $200. The price per set is $140. The time from the signing of the purchase contract until the goods are available for sale at the company is 15 days.

Source B: The total capacity is large enough and the supply time is considered negligible. The cost per unit is $138 per set. The cost per order is $210. The order time is 45 days.

The cost of managing the reserve based on the amount of inventory in kind is $2.50/unit.

Request:

- What kind of reserves does this trading company belong to ?

- Please choose the place of purchase with the smallest total cost and calculate the corresponding criteria.

Answer rating: 100% (QA)

Given Annual demand D Monthly demand 12 10012 1200 pens 3D Unit prices p 25 dollars Order... View the full answer