At what inventory level should an order be placed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pan Casero, S.A., purchases and then sells (as hot bread), 2.6 million bushels of wheat annually. Wheat must be purchased in multiples of 2,000 bushels. Order costs are $5,000 per order. Annual transportation costs are 2% of the purchase price of five dollars per bushel. The lead time is six weeks. At what inventory level should an order be placed?
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