A toy manufacturer assembles 800 trucks/day, 365 days/year. Demand is constant, and each truck has one cab that the manufacturer purchases from a supplier for $0.50/cab. In addition to the purchase price of the cab, there is a fixed shipping charge of $75 per order, plus $0.05 shipping cost per cab. The daily holding cost is 0.1%.

a. What is the appropriate inventory control model, and why? A (EOQ) model to make it the easiest way to monitor inventory.

b. Calculate the optimal number of cabs to order each time. How are you using the $0.05 shipping cost per cab?

c. What is the yearly inventory cost of using your choice of inventory control model?