The Fly-by-Night airlines has been phasing out one of the older types of aircraft that has been a mainstay of its illustrious fleet. Consequently, it has been observed that the associated usage of a glue used for maintenance of this type of aircraft has been “dropping off ” linearly with time. The current level and trend of usage are estimated to be 110 liters/year and minus 45 liters/year/year. Other characteristics of the glue include A = $25, v = $4.50/liter, and r = 0.3 $/$/year.

a. If it is now time to replenish (i.e., there is no inventory left), what order quantity should be used?

b. If the usage rate continues to drop off at the same linear rate, what should be the size of the next replenishment? lpo897