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1. A Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 60 cars per month. The cars cost $80 each, and ordering costs are approximately $25 per order, regardless of the order size. The annual holding cost rate is 18%.
a. Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted.
b. Using a $50 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars.
c. What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that Shop is open for business 360 days per year.
d. Would you recommend a no-backorder or a backorder inventory policy for this product? Explain.
e.If the lead time is seven days, what is the reorder point for both the no-backorder and backorder inventory policies?
Note: (need answers asap)
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