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(a). A local factory uses spare parts for machine maintenances. Spare parts must always be in the store when needed so as not to affect
(a). A local factory uses spare parts for machine maintenances. Spare parts must always be in the store when needed so as not to affect the production process. The data collected from past years shows that the use of spare parts is 12,000 units per year and this rate did not change much from year to year. Spare parts are sourced from outside the country and any order will be executed at once. The cost of making an order is estimated at $400. Damage and maintenance costs per unit of spare parts in the store for a year is estimated at $5 (this cost is directly proportional to the spare parts that are in the store). The unit price of spare parts is constant. Determine (i). the total annual inventory cost if the plant operates the store on a a regular basis order of 1000 units at the beginning of each month. (ii). the optimal inventory policy
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