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If the Bike Company decides to produce the handlebars, what is the optimal order quantity? What is the annual cost?

If the Bike Company decides to produce the handlebars, what is the optimal order quantity? What is the annual cost?

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A Bike Company has a line of specialty mountain bikes whichrequire 5,000 handlebars annually. The handlebars can be purchasedfrom a supplier for $30 per unit, or they can be producedinternally. The internal production cost is $20 per unit, and theproduction rate is 20,000 units per year. The cost to set upproduction is $5000. It costs $25 to issue a purchase order to buyhandlebars from the supplier. Inventory holding cost is 25% peryear. If the Bike Company decides to produce the handlebars, whatis the optimal order quantity? What is the annual cost?
 
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