Question
The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of
The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 40 cars per month. The cars cost $60 each, and ordering costs are approximately $15 per order, regardless of the order size. The annual holding cost rate is 20%.
A. Suppose backorders are permitted and backorder cost is $45 per unit per year. What is the total annual cost? (Please provide your answer to the nearest whole number!)
B. Suppose backorders are permitted and backorder cost is $45 per unit per year. What is the economic order quantity under the assumption that no backorders are permitted (provide your answer to the nearest two decimal places!).
C. Suppose backorders are permitted and backorder cost is $45 per unit per year. The company operates 300 days per year. If the lead time is six days, what is the reorder point for the backorder inventory policy? (Round your answers to two decimal places.)
D. Suppose backorders are permitted and backorder cost is $45 per unit per year. What is the economic order quantity? (Please provide your answer to the nearest whole number!)
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