Q. A manager receives a forecast for next yr. Demand is projected to be 600 units for the first half of the yr also 900 units for the second half. The monthly holding cost is $2 per unit also it costs an estimated $55 to process an order.

(a) Assuming that monthly Demand will be level during each of the six month period covered by the forecast (e.g.100 per month for each of the first six months), find out an order size that will minimize the sum of ordering also carrying cost for each of the six month period.

(b) Why is it important to be able to suppose that Demand will be level during each six month period?

(c) If the vendor is willing to offer a discount of $10 per order for ordering multiples of 50 units (e.g. 50, 100, 150), would you advise the manager to take advantage of the offer in either period? If so, illustrate what order size would you recommend?