PG has to decide whether to buy or produce your product. The demand is 40,000 units per year, the company can produce at a rate of 10,000 units per month, the cost of preparing each production run is $ 6,000, and the storage cost of one unit is $ 0.85 per month. Also consider that the cost of a unit is $ 1.5 dollars to produce, while buying it costs you $ 1.7 with an order cost of $ 1,500.

a) Should PG buy or sell?

b) Determine the optimal number of parts to be manufactured / purchased.

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c) Calculate the total annual cost of the inventory policy for each case.

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