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Hello,
I have problem understanding part of the answer b)…ann.holding cost=10000+25000/2)*0,5=11250
Can you please explain this logic? Thanks in advanceThe EOQ is 25,000 and therefore if they were not holding buffer/safety inventory, then the average inventory would, as always, be half the EOQ at 12,500 units.
Since they are also holding buffer inventory of 10,000 throughout the year, the average inventory increases to 12,500 + 10,000 = 22,500 units.
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