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To ship each other, the cost is 190+3* order quantity. The purchase cost is $17 per pair. You sell each pair for $35. Your daily demand is estimated to be 22 pairs. Assume that there are 364 days a year. The annual financial interest is 10%.
You realize that the EOQ model is not appropriate because 1) there is a lead-time of one week(7days); ii) the demand is uncertain- it is normally distributed and has a standard deviation of 4 pairs per day. You then decide to use a Periodic Review System with a review period of four weeks (28 days). Your goal is to satisfy 97.5% of demand.
1) How to determine the order quantity?
2) Calculate the average inventory(round whole number)
3) Calculate the annual holding cost
4) Calculate the annual setup cost
5) Calculate the profit
Demands for each of periods is given in illustrate what follows. All periods have same number of working days. Elucidate how much should company make each period. Illustrate what will be ending inventories in each period. Do you see any problems w..
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