Question

The annual demand of a good is 10,000 ​units, the fixed cost of placing an order...

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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