Illustrate what is optimal inventory policy

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Q Consider Avionic Manufacturing Business that wishes to meet a demand of 10 units per month by purchasing items from a vendor with a lead time of 3-quarters of a month. Item cost is $2.50 per unit, replenishment cost is $3.50 per order and holding cost is $0.50 per unit per month. Business approximates shortage cost to be $0.20 per unit per month. By letting period be 1 month, 1 has D = 100, Cu = 2.5, Ch= 0.50, Cr = 3.50, Cs= 0.20 and L = 0.75. Illustrate what is optimal inventory policy and total cost of system under optimal policy?

Reference no: EM1374946

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