Answer Happy

Question 3 (9 marks) A medical supply distributor imports N95 masks from a supplier in Asia. The monthly demand is stable and is 120,000 boxes per month. A box costs $7 including shipping but placing an order costs $450. Holding cost is $1.2 per box per year. The distributor can also produce the masks in her warehouse - up to 200,000 boxes per month. The manufacturing cost per box is $5.0 and the inventory holding cost is $0.72 per box per year. Production setup cost is $800 per production run. Currently, the warehouse has a capacity to accommodate a maximum of 10,000 boxes in the inventory; however, the warehouse can easily extend this capacity to 80,000 boxes (by leasing another warehouse) at a cost of $1,200 per year. Propose the most economical recommendation with justification