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How large should each product lot be
Course:- Other Subject
Reference No.:- EM131335959

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Company A:

An electronic retail chain wishes to minimize its ordering costs for a particularly popular model of laptop computer. This retail chain has a line of credit to finance its inventory and the current holding rate is 5.5%. The chain estimates it can sell 670,000 units per year and it pays \$375 dollars per unit. It costs \$320 dollars to place each order. How many units should it order each time?

Company B:

A manufacturer of laptop computers operates a plant with an annual capacity of 148,070,000 laptop units. One of its models is expected to sell 8,710,000 units in the coming year. How large should each product lot be if it costs \$3750 to change production from one model to another. Assume that the manufacturer values each laptop unit at \$190 dollars and it has a  holding rate of 6.5%. You should round your answer up to the nearest laptop unit.

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