Patterson Electronics supplies microcomputer circuitry to

a company that incorporates microprocessors into

refrigerators and other home appliances. One of the

components has an annual demand of 250 units, and this

is constant throughout the year. Carrying cost is

estimated to be $1 per unit per year and the ordering

cost is $20 per order.

a. To minimize cost, how many units should be

ordered each time an order is placed

b. How many orders per year are needed with the

optimal policy?

c. What is the average inventory if costs are

minimized?

d. Suppose the ordering cost is not $20, and

Patterson has been ordering 150 units each time

an order is placed. For this order policy to be

optimal, what would the ordering cost have to be?