Analyse the following item with the given information

• Demand per time unit: 6 units
• Revenue & costs connected to the item: selling price 200/unit
• Purchase cost: 100/unit
• Ordering cost: 7500
• Holding cost per unit and time unit: 4
• Continuous demand
• No backorder or lost sales

Determine the following

1. Optimal order quantity (assuming constant demand rate)
2. Average holding and ordering cost per time unit (using the order quantity assumption given above)

Now saying the demand rate depends of the inventory level of

• 10 units per time unit if inventory level is above 100,
• 5 units per time unit if inventory level is below 100

Determine the following

3. True Average holding and ordering cost per time unit when using order quantity determined in (1)
4. True optimal order quantity
5. How much profit is lost by the use of the order quantity from (1)