Homework SourseA car dealer expects to sell 1320 cars during the next year
A car dealer expects to sell 1320 cars during the next year. It cost $660 to store one car for one year. To reorder, there is a fixed cost of $225, plus $304 for each car. Find the lot size and the number of orders that should be placed so inventory costs will be minimized.
Solution
Total number of cars=1320
Let him store x cars in lot.
So, cars ordered = 1320-x
So, total cost C= 660x + [225+304(1320-x)]
C=(660-304)x + (225+304*1320)
Since coefficient of x is positive, cost will be minimum when x=0.
So, lot size should be 0 , and all 1320 cars should be ordered.
