Suppose Acme Inc. expects to sell 3600 units per year. The cost of placing and receiving an order is $125 per order. Each unit costs Acme $40. Carrying costs are 25 percent of the purchase price.
a. Calculate the number of units that Acme should order at a time if it is to minimize its total inventory costs.
b. What are Acme’s total costs of ordering and carrying inventory for a year?