You order two products from the same supplier. The annual demand for Product 1 is 10,000 units and the annual demand for Product 2 is 20,000 units. Note that demand for both products is constant throughout the year. The holding cost is the same for both products, $1 per unit per year. However, you incur a fixed cost of $200 each time you order Product 1, and a fixed cost of $100 each time you order Product 2. These fixed order costs are independent of the size of the order.
a. How many units of Product 1 and Product 2 should be ordered at a time in order to minimize total holding + order cost?
Number of Units of Product 1 to Order _____________
Number of Units of Product 2 to Order _____________
b. Suppose that the supplier insists that orders for Product 1 and Product 2 be coordinated so that they can be shipped at the same time (still incurring the fixed cost of $200 and $100, respectively). Given this requirement, how many units of Product 1 and Product 2 (to the nearest integer) should be ordered at a time in order to minimize total holding + order cost? (Hint: the products must be ordered the same number of times per year)
Number of Units of Product 1 to Order _____________
Number of Units of Product 2 to Order _____________