Chicago Mercy Hospital needs to order drugs that are used to treat heart attack victims. Annually, 500 units of drug 1 and 800 units of drug 2 are used. The unit purchasing cost for drug 1 is $150 per...

Chicago Mercy Hospital needs to order drugs that are used to treat heart attack victims. Annually, 500 units of drug 1 and 800 units of drug 2 are used. The unit purchasing cost for drug 1 is $150 per unit, and the unit cost of purchasing drug 2 is $300. It costs $20 to store a unit of each drug for a year. When only drug 1 is ordered, an order for drug 1 costs $400.


When only drug 2 is ordered, an order for drug 2 costs $600. If both drugs are ordered at the same time, the cost of placing an order is $800. Chicago Mercy’s annual cost of capital is 18%. Determine a cost-minimizing ordering policy.