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A manager receives a forecast for next year. Demand is projected to be 528 units for...

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General Management

A manager receives a forecast for next year. Demand is projectedto be 528 units for the first half of the year and 960 units forthe second half. The monthly holding cost is $2 per unit, and itcosts an estimated $55 to process an order.

a. Assuming that monthly demand will be level during each of thesix-month periods covered by the forecast (e.g., 88 per month foreach of the first six months), determine an order size that willminimize the sum of ordering and carrying costs for each of thesix-month periods. (Round your answers to the nearest wholenumber.)

Period Order Size

1 – 6 months units

7 – 12 months units

b. If the vendor is willing to offer a discount of $10 per orderfor ordering in multiples of 50 units (e.g., 50, 100, 150), wouldyou advise the manager to take advantage of the offer in eitherperiod? If so, what order size would you recommend? (Roundintermediate calculations to 2 decimal places.)

Period Order Size

1 – 6 months units

7 – 12 months units

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