What conditions on zunder which make-to-order is recommended


Problem: Let us suppose that a subassembly is typically used in batches of 200 units. Its demand rate is 900 units per year while the fixed ordering cost is$1,000. Also, there is an inventory monitoring cost under the stocking option of $Zper year. Moreover, the holding cost is assumed to be$40per unit per year. The cost of delayed product delivery is estimated at$1,500per order. (a) What are the conditions on Zunder which make-to-order is recommended? (Hint: purely hypothetically, Z>330is a condition.) (b) Let us suppose that the fixed ordering cost is now$100per order. What are the new conditions on Znow under which make-to-order is recommended? (c) Elaborate on the reason for the difference in your answers to (a) vs. (b).

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