A company needs 150,000 items per year. It costs the company $640 to prepare a production run of these items and $7 to produce each item. If it also costs the company $0.75 per year for each item stored, find the number of items that should be produced in each run so that total costs of production and storage are minimized.

16,000 units.

Step-by-step explanation:

The classic model for inventory involves:

K=set up cost per order. In this case, $640

D=demand. In this case, 150,000 units.

h=holding cost per unit per year. In this case, $0.75 each

The optimum order is found by minimizing TCU.

The number of items that should be produced in each run so that total costs of production and storage are minimized is 16,000 units.

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step-by-step explanation:

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