The annual demand of a good is
10,000
units, the fixed cost of placing an order is
$90
and the annual cost of storing an item is
$30.
The same order, Q, is placed at regular intervals throughout the year, and the firm waits for stock levels to reduce to zero before ordering new stock.
(a) Obtain an expression, for the total ordering cost C, in terms of Q.
(b) Work out how many items should be ordered each time to minimise total cost.
(c) What is the minimum total cost?
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