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Unformatted text preview: and holding costs are based on 20 % annual interest rate. a. How much should they order? b. How often should they order? Question:-What if they order very large quantities?-What if they order very frequently? Major Tradeoffs Cost Components 100 200 300 400 500 200 400 600 Lot S ize (O r d e r Q uantity) Costs Fixed Cost Holding Cost Total Cost Objective: minimize long-run average total cost- Total cost = Fixed cost + Holding cost- Fixed cost = $K per order...
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- Spring '08