A company has the following 6 skus Item Annual Demand Unit Cost Setup Cost 1 10,000 4.00 200 2 1,000 10.00 500 3 4,000 5.00 100 4 12,000 0.50 200 5…

A company has the following 6 skus

Item    Annual Demand          Unit Cost               Setup Cost

1             10,000                          4.00                           200 

2               1,000                          10.00                         500

3                  4,000                        5.00                          100

4                 12,000                          0.50                        200

5                  5,000                           2.00                         100

6                 2,500                              2.00                        200

The holding cost rate is 25%. The company limits the investment in average inventories to $10,000. The company replenishes all of these items every three months.

Does this replenishment plan fit into the investment limit? What is the total cost with this plan? What is the best policy under this investment limit? How much oes it improve the total cost ?

Holding costReplenishment cycleSo No of Orders per yearAvge Investment in InventoryGiven Scenario : 25%34$10,000 Item Annual demand Unit cost Setup cost123456 10,0001,0004,000…