What is the optimum order size and minimum inventory cost in the following case: A retailer of motorized bicycles has examined cost data and has determined a cost function which expresses the annual cost of purchasing owning and maintaining inventory as a function of the size (number of units) of each order it places for the bicycles. The cost function is C= f(q) = 4860/q + 15q + 750,000 where C equals annual inventory cost, stated in dollars and 'q' equals the number of cycles order each time the retailer replenishes the supply. i. Determine the order size which minimizes annual inventory cost. ii. What is minimum annual inventory cost expected to equal?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

The cost function for the annual cost of purchasing owning and maintaining inventory as a function of the number of units ordered is C= f(q) = 4860/q + 15q + 750000 where C equals...

(The entire section contains 89 words.)

Unlock This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial
Approved by eNotes Editorial Team