A company produces two items, A and B, that are

perishable and deteriorate when they are stored.

The data concerned are:

_______________________________A B

Demand/year ___________________2000 250

Cost per unit____________________ 50 60

Anual rate cost of storage__________ 0.20 0.10

Preparation cost _________________100 480

Missing cost/unit/year _______________ 2

The administration has established a policy that the

turnover of the total inventory must be greater than

or equal to 19 (remember that inventory turnover is

defined as the annual demand of all items expressed

in dollars, divided by the average total

investment in inventory) .

Determine the optimal inventory policy and the cost of

the inventory rotation policy for administration.