1. Hamilton Fabricators Case: (3 marks)

Hamilton Fabricators at Te Rapa orders steel plates from the Te Akau steel plant on a regular basis. An investigation revealed the following details: annual demand = 5,000 tons, cost of steel = $2,000/ton, current order size = 500 tons transported by TranzRail, TranzRail transport cost = $100/ton, safety inventory carried = 50% of demand during replenishment lead time, Inventory holding cost = 25% of purchase price per year, replenishment lead time = 5 days.