(Answered) Question a company requires a particular item from an

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Question: A company requires a particular item from an outside supplier for its production process. Annual demand for the item is 3000 units. Order costs are estimated at £15 and holding costs at 20 per cent of the purchase price of the item, which is £5.50 per unit.

(a) Determine the optimum order quantity.

(b) What are the critical assumptions behind this calculation?

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