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3. Suppose a buyer procures an item from a supplier for which order cost is $50/order, annual requirement =5000 unit and annual holding cost fraction

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3. Suppose a buyer procures an item from a supplier for which order cost is $50/order, annual requirement =5000 unit and annual holding cost fraction is .4 $/$/yr. a) b) If the price charged by the supplier for this item is $12/unit, what should be the buyer's lot size? Now suppose the supplier offers a temporary price reduction of 80 cents; i.e., per unit price for the next order for the buyer would be $11.20/unit. What should be the size of the buyer's next (i.e., special) order? How much money the buyer is saving by placing the special order? Assume that the after the special order, the buyer would procure the item from the supplier in the EOQ lot size you calculated in part a) and that the buyer would procure the item from the suppler for a long run. c)

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