Question: I am so confused with this question please answer step by step Centralisation of inventories at Massachusetts General Hospital Massachusetts General Hospital operates nine different
I am so confused with this question please answer step by step
Centralisation of inventories at Massachusetts General Hospital
Massachusetts General Hospital operates nine different departments. Each department places orders on suppliers for a particular item of inventory independently. Each department incurs an order placement cost of $13 every time the inventory is replenished, an item of inventory costs $1 to hold as inventory for a year, demand in each department is 600 units per week and the hospital works 52 weeks a year.
Questions
a) Using the Economic Order Quantity approach, determine the optimal batch size for each of the departments and the total minimised annual costs in managing this item of inventory across all departments.
b) Determine the optimal batch size and the minimised total annual costs if Massachusetts General Hospital were to centralise its inventory replenishment activities and place one order for all nine departments.
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