Determine the optimal order or production quantity

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Assignment:

A company can produce an item or buy it from a contractor. If it is produced, it will cost $20 each time the machines are set up. The production rate is 100 units per day. If it is bought from contractor, it will cost $15 each time an order is placed. The holding cost of the item, whether bought or produced is %50 per unit per year. The company's annual demand is estimated at 20000 units. assuming that no shortage is allowed and one year has 250 working days, should the company buy or produce? Determine the optimal order or production quantity and the relevant inventory cost.

Reference no: EM133990978

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