M. Cotteleer Electronics supplies microcomputercircuitry to a company that incorporates microprocessors intorefrigerators and other home appliances. One of the componentshas an annual demand of 250 units, and this is constant throughoutthe year. Carrying cost is estimated to be Sl per unit per year,and the ordering (setup) cost is $20 per order.a) To minimize cost, how many units should be ordered eachtime an order is placed?b) How many orders per year are needed with the optimal policy?c) What is the average in ventory if costs are minimized?d) Suppose that the ordering (setup) cost is not $20, and Cotteleerhas been ordering 150 units each time an order is placed. Forthis order policy (of Q = 150) to be optima l, determine whatthe ordering (setup) cost would have to be.

Practical Management Science
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Author:WINSTON, Wayne L.
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M. Cotteleer Electronics supplies microcomputer
circuitry to a company that incorporates microprocessors into
refrigerators and other home appliances. One of the components
has an annual demand of 250 units, and this is constant throughout
the year. Carrying cost is estimated to be Sl per unit per year,
and the ordering (setup) cost is $20 per order.
a) To minimize cost, how many units should be ordered each
time an order is placed?
b) How many orders per year are needed with the optimal policy?
c) What is the average in ventory if costs are minimized?
d) Suppose that the ordering (setup) cost is not $20, and Cotteleer
has been ordering 150 units each time an order is placed. For
this order policy (of Q = 150) to be optima l, determine what
the ordering (setup) cost would have to be.
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