INDUSTRIAL CASE

Your company manufactures approximately $16,000$ RV motor homes a year, and sells them for

prices between $$35,000$ and $$220,000.$ You are responsible for maintaining the inventory for the

required tires to meet this demand. You know that your normal weekly demand for tires is

approximately $1500,$ with a standard deviation of $570$ tires a week. Because of the high value of

the finished product, your company has a standard for its inventory of having a $97\%$ chance of

having stock in inventory between orders. Failure to have the tires through normal channels will

cost the company $$200$ per tire to expedite them to the factory in $0\mathrm{.}5$ weeks. The tires cost $$125$

each, FOB at the tire factory in Akron, Ohio. The normal transportation cost is $$12$ each from

Akron to your factory. From the time of making the order to when the tires are available at the

factory, it takes $3$ weeks $(0\mathrm{.}5$ weeks for order processing: $2$ weeks for picking and transportation;

and $0\mathrm{.}5$ weeks for moving from receiving to the assembly line$).$ You have determined that your

inventory carrying cost is approximately $25$ percent and it costs you $$80$ to make an order.

Assume $52$ weeks a year in your analysis