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A companys annual inventory need is $4 million. Inventory ordering cost is $350 per order. The carrying cost is 10% cost of capital. The companys

A companys annual inventory need is $4 million. Inventory ordering cost is $350 per order. The carrying cost is 10% cost of capital. The companys current ordering policy is equal monthly orders by dividing the annual demand by 12.

a) Is the companys ordering policy efficient? Show work.

b) What is the optimal inventory order size and what will be the total cost of inventory management?

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