Question

A store sells about 360 calculators peryear. It would cost the store $8 to store one calculator for the whole year. On the other hand, it costs $10 each time the store reorders the calculators, plus $8for each calculator. How many times per year should the store reorderthe calculators and how many at a time to minimize inventory costs?

Answer 1

PART(a):

Let x be the number of items per order.

Yearly carrying cost = (yearly storage cost per item) X (average number of times carried)

Yearly reordering cost = (cost of each order) X (number of orders placed per year)

The total inventory cost is given by,

diff wrt x,

For the minimum cost,

So the minimum number of orders placed per year is given by,

PART(b):

Hence the each order should contain 30 calculators at a time.

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