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LOGS 308-A retail store purchases a type of product

Author:
January 13th, 2018

A retail store purchases a type of product directly from a manufacturer at $50 each. The demand for the product is constant over time, with a demand rate of 500 units per year. The annualized cost to store a unit of inventory is $40. Placing an order from the manufacturer incurs an administrative cost of $100 per order. What is the optimal order quantity? How many times must the store order from the manufacturer each year?

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