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You purchase units of a certain raw material from a supplier at a cost of $4 per unit, which you use to produce your finished
You purchase units of a certain raw material from a supplier at a cost of $4 per unit, which you use to produce your finished goods. On average, you use 50,000 units of this raw material annually to produce your own inventory. Each time you order a new shipment of raw materials, you incur an administrative cost of $800 regardless of the order size. You attribute 20% of the cost of capital to storing idle raw materials. a. How many units should you purchase in each order in order to minimize your total annual cost of inventory? b. If you proceed with the order quantity you solved in part (a), how many orders will you need to place each year? c. If you proceed with the order quantity you solved in part (a), what will your total cost of inventory be each year, including cost of goods
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