A hospital is trying to determine how many boxes of a certain commonly used supply item to order. They estimate that that the demand for the item averages 1,000 boxes per week. The ordering cost is $50 per order and it costs $20 to hold one box in inventory for one year. The lead time for orders is always 1.5 weeks and inventory is managed with a continuous review policy. Suppose the hospital orders every two weeks. How large is an order on average and what is the total annual cost?
Supply item in a hospital
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