Question: A single inventory item is ordered from an outside supplier. The anticipated demand for this item over the next 12 months is: Month 1 2

A single inventory item is ordered from an outside supplier. The anticipated demand for this item over the next 12 months is:

Month	1	2	3	4	5	6	7	8	9	10	11	12
Requirements	10	12	4	8	15	25	20	5	10	20	5	15

The initial inventory in Month 1 is 4 and the ending inventory in Month 12 should be 8. Assume that the setup cost is $40, and the holding cost is $1.5 per month.

a). Determine the lot sizes using the least unit cost heuristic.

b). Determine the lot sizes using the part period balancing.

c). Which lot-sizing method resulted in the lowest cost for the 12 periods?

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