In: Statistics and Probability
The A&M Hobby Shop carries a line of radio-controlled model
racing cars. Demand for the cars...
The A&M Hobby Shop carries a line of radio-controlled model
racing cars. Demand for the cars is assumed to be constant at a
rate of 40 cars per month. The cars cost $60 each, and ordering
costs are approximately $15 per order, regardless of the order
size. The annual holding cost rate is 20%.
- Determine the economic order quantity and total annual cost
under the assumption that no backorders are permitted. If required,
round your answers to two decimal places.
Q* =
Total Cost = $
- Using a $45 per-unit per-year backorder cost, determine the
minimum cost inventory policy and total annual cost for the model
racing cars. If required, round your answers to two decimal
places.
S* =
Total Cost = $
- What is the maximum number of days a customer would have to
wait for a backorder under the policy in part (b)? Assume that the
Hobby Shop is open for business 300 days per year. If required,
round your answer to two decimal places.
Length of backorder period = days
- Would you recommend a no-backorder or a backorder inventory
policy for this product? Explain. If required, round your answers
to two decimal places.
Recommendation would be backorder inventory policy,
since the maximum wait is only days and the cost
savings is $ .
- If the lead time is six days, what is the reorder point for
both the no-backorder and backorder inventory policies? If
required, round your answers to two decimal places.
Reorder point for no-backorder inventory policy is .
Reorder point for backorder inventory policy is .