A retailer orders eight products from a single vendor. Assume that the demand for each product is deterministic, and is given below. The major fixed ordering cost is estimated to be $8; that is, the cost for the first item on the purchase order is $8. It costs $1 to add additional products to the purchase order. The carrying charge has been established as 0.30 $/$/year.

Item Demand (Units/Year) vi ($/Unit)

1 600 2.50 2 200 12.65

a. Find the appropriate run quantities for each item.

b. Using Equation 10.5, find a lower bound on the total cost. P-96