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Demand for a certain product is 10000 units. Company can purchase them for $50 per unit. Purchase order cost is $30 per lot. The company
Demand for a certain product is 10000 units. Company can purchase them for $50 per unit. Purchase order cost is $30 per lot. The company can also produce them for $25 per unit. The production rate is 15000 units per year. Setup cost is $100. Inventory holding cost is $10 per unit per year. Calculate the total cost with economic order quantity (EOQ) and total cost with economic production quantity (EPQ). Should the company produce or buy the item? Shortages are not allowed. (25 points)
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