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Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 2

Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 2,700 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $13 per unit of average inventory. Every time an order is placed for more of item X, it costs $26.

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