Policies should company adopt based on total cost per unit

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Reference no: EM13758667

Two inventory policies have been suggested by the purchasing department of a company:

Policy 1 : Order 150 units. The reorder point is 50 units and the time between placing and receiving an order is 10 days.

Policy 2 : Order 200 units. The reorder point is 75 units and the time between placing and receiving an order is 15 days.

The setup cost per order is $20 , and the holding cost per unit per day is .02 cents.

(a) Which of the two policies should the company adopt based on Total Cost per Unit or TCU?

Reference no: EM13758667

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