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Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 2000 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $5 per unit of average inventory. Every time an order is placed for more item X, it costs $10.

(a) Whenever item X is ordered, what should the order size be?
(b) What is the annual cost for ordering item X?
(c) What is the annual cost for storing item X?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M986489

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