Question: Let us suppose that a subassembly is typically used in batches of 200 units. Its demand rate is 900 units per year while the fixed

Let us suppose that a subassembly is typically

Let us suppose that a subassembly is typically used in batches of 200 units. Its demand rate is 900 units per year while the fixed ordering cost is $1,000. Also, there is an inventory monitoring cost under the stocking option of $Z per year. Moreover, the holding cost is assumed to be $40 per unit per year. The cost of delayed product delivery is estimated at $1,500 per order. (a) What are the conditions on Z under which make-to-order is recommended? (Hint: purely hypothetically, Z>330 is a condition.) (b) Let us suppose that the fixed ordering cost is now $100 per order. What are the new conditions on Z now under which make-to-order is recommended? (c) Elaborate on the reason for the difference in your answers to (a) vs. (b)

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