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A company has the following 6 skus
Item Annual Demand Unit Cost Setup Cost
1 10,000 4.00 200
2 1,000 10.00 500
3 4,000 5.00 100
4 12,000 0.50 200
5 5,000 2.00 100
6 2,500 2.00 200
The holding cost rate is 25%. The company limits the investment in average inventories to $10,000.
The company replenishes all of these items every three months.
Does this replenishment plan fit into the investment limit? What is the total cost with this plan? What is the best policy under this investment limit? How much oes it improve the total cost ?
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