**M. Cotteleer Electronics Inventory Management Scenario**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 260 units, and this demand is constant throughout the year. The carrying cost is estimated to be $1.00 per unit per year, while the ordering (setup) cost is $21 per order.**Questions:**a) To minimize cost, how many units should be ordered each time an order is placed? **Answer:** 104.50 units (round your response to two decimal places)b) How many orders per year are needed with this optimal policy? **Answer:** ____ orders (round your response to two decimal places)

Annual Demand of the component = D = 260 units Carrying Cost per unit per year = Cc = $1.00 Ordering Cost per Order = S = $21a. Though the answer for part (a) is shown in the question, we will still solve part (a) again as it is not mentioned to explicitly solve only part (b). EOQ is the economic order quantity which minimizes the total annual inventory cost. This is the quantity which should be ordered each time as this minimizes the total annual ordering cost and the annual carrying cost which comprise the total annual inventory cost. EOQ is calculated as per the equation below: EOQ = 2 x D x SH where the symbols used are as per Step 1 Substituting the values from step 1 in the above formula, we get EOQ = 2 x 260 x 211.00 = 104.498 Rounding off to 2 decimals, we get EOQ = 104.50 unitsBased on the EOQ calculated in step 2, the number of orders is calculated as shown below: Number of orders per year = Annual DemandEOQ = 260104.50 = 2.488 Rounding off to 2 decimals, we get Number of orders per year = 2.50 ordersNumber of units to be ordered each time an order is placed = 104.50 units Number of orders per year needed with the optimal policy = 2.50 orders