Explain how many units should be ordered each time

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Q. Everett Mann's Dream Store sells waterbeds and supplies. The best selling bed in the store has a Yearly demand of 400 units. The ordering cost is $40, while the holding cost is $5 per unit per year. There are 250 working days per year and the lead-time is 6 days.

(a) To minimize total cost, explain how many units should be ordered each time an order is placed?

(b) If the holding cost per unit was $6 instead of $5, illustrate what would the optimal order quantity be?

Reference no: EM1373907

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