M. A company in Hungary manufactures and sell the product "Mini Bike". The company operates at maximum capacity, producing seven days a week, which makes 50 000 units per year. (To make it simple, we assume that a year has 50 weeks.)

The value of a Mini Bike unit leaving production is 100. The cost of capital is estimated to 20%. The cost for holding inventory is 15%, which gives a total inventory carrying cost percentage of 35%. No safety stock is kept in Hungary.

Mini Bike is distributed to a wholesaler in the UK, where it's sold to the end customers. There are two transportation alternatives - by rail or by truck:

• By rail means a dispatch every 14 days. The transportation time is one week. The cost is 4/unit.
• By truck means a dispatch every week. The transportation time is two days. The cost is 6/unit.

In the UK, the wholesaler has a safety stock corresponding to half a week of sales.

Which distribution alternative gives the lowest total cost when considering the transportation cost and inventory carrying cost, in Hungary, during transportation and in the UK?

Mi. What is the total cost, if transported by train? E/year Mj. What is the total cost, if transported by truck? E/year