Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 22

Eurotronics is a European manufacturer of electronic components. During the course of a year, it requires container cargo space on ships leaving Hamburg bound for the United States, Mexico, South America, and Canada. Annually, the company needs 160,000 cubic feet of cargo space. The cost of reserving cargo space is $7,000, and the cost of holding cargo space is $0.80 per cubic foot. Determine how much storage space Eurotronics should optimally order, the total cost, and how many times per year it should place orders to reserve space.