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A firm produces flow units at a rate of 20 units per week (50 weeks per year). Raw materials are purchased from an outside supplier

A firm produces flow units at a rate of 20 units per week (50 weeks per year). Raw materials are purchased from an outside supplier for $100 per unit. The firm has to spend $400 in processing costs every time an order is placed. The cost of capital (per year) is estimated at 10%. Also there is a storage cost of $10 per unit per year.

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