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EOQ calculation. The demand for toilet paper in a convenience store occurs at the rate of 1 0 0 packets per month. Each packet contains

EOQ calculation. The demand for toilet paper in a convenience store occurs at the rate of 100 packets per month. Each packet contains a dozen rolls and costs $8. Assume the order placement cost to be $20 per order and the holding cost rate to be 0.25. Take one month to be the equivalent of four weeks.
a) Determine the optimal order quantity, reorder interval, and optimal cost using the EOQ model.
b) Suppose now that backordering of demand is allowed in the situation described in the previous question. The cost of backordering is $10? packet/year. Use the EOQ model with backordering to determine the optimal order quantity, maximum backlog allowed, and optimal average annual cost.
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