1. Suppose that a company buys about $81,000 worth of items from a vendor each year. If ordering cost is $25 per order and holding cost rate is 20%, how many dollars worth of items should be bought in each order? (Hint: Assume one dollar = one unit).

2.The vendor in the above problem will offer you a 2% discount if you buy at least $9,000 of items in each order. Should you accept this offer? If no, what is a fair counter offer?

Research Problem

Suppose that American Technology Corporation can allow shortages for the product used in the business case, at a cost of $4 per unit per year. Construct a new spreadsheet model.