Inspecting the numbers, we see that total costs start out at almost $5,000 and decline to just under $1,900. The cost-minimizing quantity is about 2,500.

To find the cost-minimizing quantity, we can look back at Figure 21.4. What we notice is that the minimum point occurs right where the two lines cross. At this point, carrying costs and restocking costs are the same. For the particular types of costs we have assumed here, this will always be true, so we can find the minimum point just by setting these costs equal to each other and solving for Q*:

Carrying costs = Restocking costs

With a little algebra, we get:

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