You are in charge of inventory for Bongo's Appliance Outlet. The recent demand for the Gremlin brand of microwave ovens has followed the following pattern:

Bongo's recognizes a carrying cost of 23% per year for their inventory. They purchase the ovens from the manufacturer for a wholesale price of $163 each. It costs them $200 to make one order, including purchase and shipping costs. There is a 2 week lead time for delivery once the order is made. Bongo's also has a policy of maintaining a 95 % customer service level.

a. What should the inventory policy be (order quantity and reorder point)? Discuss any implications or problems you might see with the inventory policy.

b. The manufacturer has approached Bongo's with an offer to negotiate a price discount if Bongo's will order 500 ovens at a time. They said they would be able to keep the purchase and shipping costs the same. What is the highest the wholesale price can be and still make the offer an attractive one financially?

c. The person responsible for forecasting demand for appliances has just sent you a note. It states that the market appears to be changing and they offer as evidence that the MAD for the forecast for microwave ovens has gone from 12 to 23 units in only 6 months. How would you interpret this and what would your response be?

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Week Demand 53 22 1 2 3 4 5 67 8 9 10 32 61 17 37 43 24 53 53 30