A firm purchases a material that shows definite price seasonality throughout the year with relatively minor fluctuations within each month. Requirements for the material are constant throughout the year at 50,000 units per month. The prices throughout the year are projected as follows:

Inventory-carrying cost is 30 percent per year. The current buying strategy is to purchase directly to requirements at the going price.
(a) Does a mixed strategy of forward and hand-to-mouth buying lower purchasing costs? Which is the best strategy mix?
(b) If a mixed strategy is better, what concerns might there be in using it?

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Month Price (S/unit) Month Price (S/unit) an. Feb. Mar Apr May une 4.00 4.30 4.70 5.00 5.25 5.75 July Aug. Sept Oct. Nov Dec 6.00 5.60 5.40 5.00 4.50 4.25