A part costing $100/unit is purchased from a supplier. It costs roughly $150 to place an order, regardless of the order size. Total demand for this part in the production process is 25,000 units/year. Inventory is financed with a line of credit at 13%.
How many parts should be ordered each time an order is placed with the supplier? How many times will the part be ordered each year? What is the annual holding and order costs if the optimal policy is used?