Humber Lakeshore High-Tech Company buys memory chips in Japan for $5.00 each. It costs $450.00 to place an order with the supplier. Annual demand is 15000 items, and the annual holding costs are charged at 30%. (a) Find the economic order quantity and the optimal time (in calendar days) between orders.

The annual number of items demanded D is: ____

The fixed cost per order C0 is: ____

Enter II in decimal form (i.e. 0.03 instead of 3.00%)

The annual holding cost rate I is: _____

The unit cost of the inventory item C is: _____

If necessary, round your answer for Ch to 2 decimals.

The cost of holding one item in inventory for one year Ch is: _______ If necessary, round your answer for Q to the nearest whole number.

The economic order quantity is Q is ______ If necessary, round your answer for T to the nearest whole number.

The optimal time (in calendar days) between orders is T is ______ (b) Find the total annual relevant cost.

If necessary, round your answer for TC(Q)TC(Q) to 2 decimal places.

The total annual relevant cost TC(Q) is _____ (c) Suppose Humber decided to operate with backorders (planned shortages). Say, the backordering costs are estimated to be $0.50 per unit per year. Find the economic order quantity and the maximum number of backorders. The cost of backordering one item for one year Cb is: _________

If necessary, round your answer for Q to the nearest whole number.

The economic order quantity is Q is ________

If necessary, round your answer for S to the nearest whole number.

The maximum number of backorders S is ___________ (d) Find the total annual relevant cost with backorders (planned shortages). How do you think, can the company use the backorder inventory policy or not? Why?

If necessary, round your answer for TC(Q,S) to 2 decimal places.

The total annual cost TC(Q,S) for the inventory model with backorders is ___________ Your final conclusion is

• The company technically can not use the backorder policy as the total annual relevant cost drops if such policy is introduced.
• The company technically can use the backorder policy as the total annual relevant cost increases if such policy is introduced.
• The company technically can use the backorder policy as the total annual relevant cost drops if such policy is introduced.
• None of the above.