At Lawn King (LK), the managers are attempting to make decisions concerning production and inventory control.Their policies must take into account the fact that they want to keep finished goods inventory low since they have little confidence in their forecasts for particular model sales.

Raw material for LK is the motors they purchase and install on the lawnmowers. One of the motors which LK buys is the 4HPX. Assume the cost of purchasing each motor is $40. Each time they place an order, their cost is $20 for processing the order. Assume also their cost of capital was 10%, and demand for these motors was 1000 for the year. Calculate the optimal order quantity for this motor. State the resulting policy, including reordering point, if lead-time is one day.

Assume a 250-day working year.