using vogel approximate method (VAM) need to develop optimal purchasing and inventory plan.

58 A bicycle manufacturing company is interested in optimally planning the inventory levels for tires. Inventory holding cost is $3 per tire per period and the capacity of the vendor is 400 units per period. Assume that demand can be backordered at a cost of $5 per tire per period. The purchase price and transportation rates vary depending upon the time of the year. The demand for tires is derived from the production schedule for bicycles. The purchase price, demand and transportation costs for the next four quarters are as follows. Quarter 1 2 Demand 500 300 500 400 200 Purchase price ($/unit) 80 100 110 90 90 Transportation cost ($/unit) 6 5 6 Determine the optimal purchasing and inventory plan. 4 5 6 500 110 5