Midwest Precision Control Corporation is trying to decide between two alternate Order Plans for its inventory of a certain item. Irrespective of the plan to be followed, demand for the item is expected to be 1,000 units annually. Under Plan 1st, Midwest would use a teletype for ordering; order costs would be $40 per order. Inventory holding costs (carrying cost) would be $100 per unit per year. Under Plan 2nd order costs would be $30 per order. And holding costs would 20% and unit Cost is $480.
Which Plan would result in the lowest total inventory cost?
