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Problem # 7 Inventory Analysis Ceramics Direct produces tiles for luxury flooring. The demand per month is 7 0 0 pounds of tile. Ceramics Direct

Problem # 7 Inventory Analysis
Ceramics Direct produces tiles for luxury flooring. The demand per month is 700 pounds of tile. Ceramics Direct can produce 1500 pounds of tile per month. Since the machinery gets dirty and must be cleaned before every batch the setup cost if $300. It cost $10 to produce one pound of tile. The inventory cost is 30% of annual cost. There can be a chance of backlogging. The two types are loss of goodwill, which is about $20 per pound. Shortage penalty is $1.50 per pound short every month. Find the economic order quantity, optimal backorder, and annual total cost of inventory.
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