Question: Multi-Part Question: Deterministic Inventory Model. David's Delicatessen sells a special Hebrew sausage. The owner, David Gold, estimates that the demand for the sausage is steady

Multi-Part Question: Deterministic Inventory Model. David's Delicatessen sells a special Hebrew sausage. The owner, David Gold, estimates that the demand for the sausage is steady at 1000 kilograms a month. The special sausage cost Gold $5.00 a kilogram. The cost of ordering and shipping from the supplier is $200 each order. Gold's accountant, Irving Wu, estimated an annual holding cost of the sausage is 20% of the sausage purchase cost.

  1. How many kilograms of the special sausage should Gold order each time to minimize the annual costs on holding and ordering? Calculate the annual total costs of holding, ordering, and purchasing the sausage.
  2. What is the maximal inventory level, average inventory level? How many times will Mr. Gold order each year?
  3. At what inventory level should Mr. Golds Reorder assuming that it will take half of a month to receive an order?
  4. Recently, Mr. Gold received the following offer from his supplier: If Gold can change his order quantity to 5000lb (one full truck load) each time, his shipping cost will be reduced by half. Should Gold accept the offer?

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