View Full Version : Calculus: inventory management

02-25-2012, 07:37 PM
Manchester Co. stocks Part #567. The annual demand rate for the part isconstant and known to be 4000 units/year. The part is purchased at a cost of $4/unit from an independentsupplier. The annual holding cost forPart #567 is 25% of the per-unit purchase price, per year. Every time an order is placed, a fixed costof $80 is incurred. (Hints: Pay close attention to units.)

a) What is the optimal order quantity for minimizing the averageannual total cost?
b) What is the optimal number of times per year for Champaign Co. toplace an order?
c) What is the corresponding average annual total cost?

Per yrunits=4000
Unit price=$4
Annual holding cost=25% of per unit cost = $1
Ordering cost=$80


The Optimal number of times per year for the Champaign Company to place an order is Demand per year / Optimal Quantity:


The optimal number of times the company places an order is 5.

The average annual total cost= ????

02-25-2012, 07:52 PM
I am not certain about a and b, and really dont know what is happenning in c.