Assume that company XYZ sells metal racks. The company estimates that the demand for metal racks is approximately 20 units per week. The unit cost of the racks is $350, but the metalworking shop charges a fixed cost of 8500 per order to cover the cost of setup for the XYZ's order. The XYZ company estimates that the cost of carrying one dollar worth of item over one year is $0.1. Given above
Please plot (using Excel) the total fixed order costs, total inventory' carrying costs and total relevant costs {i.e., the sum of total fixed costs and total inventory carrying costs) as a function of replenishment order quantity. And indicate the minimum of the total relevant cost function and the replenishment quantity corresponding to that minimum cost.
Use the EOQ formula and find optimal replenishment quantity to verify your results in part a.