1 Consider a two-item inventory system with the attributes in Table 21.

a Draw an exchange curve for these products (use AOC and AII as the x- and y-coordinates).

b Currently, management is ordering each product twice a year. How can it improve on this strategy?

c The order costs correspond to machine setup times.

Machine time is valued at $50 per hour. If management

wants to limit machine setup time to 500 hours per year, what strategies are available?

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TABLE 21 K D C Product 1 $500 10,000 $2,000 Product 2 $800 20,000 $250