A manufacturer’s annual demand of a certain part is 19500 units. The ordering cost is $25 per order and the carrying cost is $4 per unit per year. The Manager policy is to order 1000 just before they run out.
What is the annual inventory cost?
What is the optimal order size?
Are the annual holding & the annual ordering cost always equal? Explain.
How much saving can be achieved if they followed the optimal policy?