3. A manufacturing company has an expected usage of 500,000 units of certain product during the next

Question:

3. A manufacturing company has an expected usage of 500,000 units of certain product during the next year. The cost of processing an order is 100 and the carrying cost per unit is 2 for one year. Lead time on an order is five days and the company will keep a reserve supply of three days' usage. You are required to calculate

(a) the economic order quantity and

(b) the reorder point. (Assume 360-day year).

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