Problem:
Company A's demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total $38 per order. The annual holding cost rate is 26% of the value of the inventory. The per-unit cost of inventory is $12.
Company B's demand is uniform throughout the year and totals 15,000 units per year. The production setup costs total $84 per setup. The annual holding cost rate is 28% of the value of the inventory. The per-unit cost of finished product is $19. The production rate is constant and equivalent to 60,000 units per year.
Q1. Determine the order size for Company A in the given scenario that would minimize total annual cost by using the economic order quantity model, showing all of your work.
Q2. Determine the lot size for Company B in the given scenario that would minimize total annual cost by using the economic production lot size model, showing all of your work