Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. The Greenfield Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate

1.The Greenfield 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 order size. The annual holding cost rate is 20%.

a.Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted.

b.Using a $45 per-unit-per-year backorder cost, determine the minimum cost inventory and total annual cost for the model racing cars.

c.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.

d.Would you recommend a no-backorder or a backorder inventory policy for this product? Explain.

e.If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions