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2. Each month, Ayna's Acrylics resells 750 cans of paint primer, which it purchases from a supplier for $10 per can. Each time Ayna's
2. Each month, Ayna's Acrylics resells 750 cans of paint primer, which it purchases from a supplier for $10 per can. Each time Ayna's places an order, it incurs a fixed cost of $72 for processing. Assume that the EOQ conditions hold, and that Ayna's believes that unfilled orders can be backlogged (and filled at a later date) at a cost of $6.75 per can per month. Suppose also that the annual holding cost for surplus inventory is $9 per unit. Assume that, when a new shipment arrives from its supplier, Ayna's can fill backorders immediately. (a) Determine the optimal order quantity. Using the optimal order quantity, determine the following: (b) Determine the average annual cost. (c) Determine the average number of orders that will be placed annually. (d) Determine the maximum shortage that will occur. (e) Using the optimal order quantity, determine the fraction of time that there will be a shortage (i.e., backlogged demand). (f) Determine the average time (in hours) that a demand waits to be filled. [Hint: The average time a demand waits to be filled will be between 0 and 10 hours.] (g) Suppose that any customer that must wait more than 14.6 hours will cancel its order. If Ayna does not want to lose any customers, determine the optimal order quantity in this case.
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