9-11 The expected demand for a raw material during a future 12-month period is as follows:

Demand, Demand, Month units Month units 1 180 7 130 2 220 8 360 3 190 9 110 4 140 10 280 5 270 11 250 6 210 12 160 The item is used at a uniform rate during any one month. Ordering costs are $40 per order. The unit purchase price is $5 for lot sizes of less than 500, and $4.90 for lot sizes of 500 or more units. Annual carrying costs per unit of inventory are approximately 30 percent of the unit purchase price. The procurement time is one week.

Three ordering rules have been proposed. These are that the order quantity should be equal to

(a) a one-month supply,

(b) a two-month supply, and

(c) a three-month supply. Which of these proposals is the most economical on the basis of an annual cost comparison? (Ans. $13,136; $13,068; $12£62)