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A shop carries a line of radio controlled racing cars. Demand for the cars is at a constant rate of 40 per month. The cars cost 60 each, and ordering costs are 15 per order, regardless of order size. The annual holding cost rate is 20%.
a. Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
b. Using a 45 dollar per year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars
c. What is the maximum # of days a customer would have to wait for a backorder under the part b policy? Assume the shop is open for 300 business days a year
d. Would you recommend a no backorder or backorder inventory policy for this product? explain
e. If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies?
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