The Cover-up Drapery Company carries four types of fabric with the following characteristics:

Type	Annual Demand (yards)	Item Cost per Yard
1	300	$20
2	250	$18
3	100	$12
4	200	$8

Assume that the items are to be ordered together from the same supplier at an ordering cost of $20 per order and an annual carrying cost of 20 percent. Also assume 300 working days in a year.

Suppose you are the supplier of the Cover-up Drapery Company. It costs $2000 each time you change over your fabric-producing machine from one type to another (1, 2, 3, or 4). Assume that your carrying cost is 30 percent.

a. What lot sizes would the supplier of fabric prefer to make for items 1, 2, 3, and 4?

Type Lot Size

1. ?

2. ?

3. ?

4. ?

b. How would you reconcile the lot sizes that the supplier would like to produce and those that the Cover-up Drapery Company would like to buy? Describe several ways in which these two differing lot sizes can be reconciled.