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Acme Home Furnishings supplies decorative items to department stores. Planning is underway for the production of the following items during the next production period:
Quilts Shades Pillows
Fabric required (yards) 7 4 9
Time required (hours) 1.5 2 0.5
Packaging material (ounces) 3 2 1
Profit 12 10 8
Acme has 3000 yards of material in stock for this production period. Five hundred hours of production time are scheduled and 400 ounces of packaging material is available. Each of these quantities can be adjusted through overtime or extra purchases. Acme's highest priority is to achieve a profit of $3200. Their second priority is to avoid additional purchases of packaging material. Third, Acme wants to use all of the scheduled production hours and fourth, minimize any fabric remaining from the 3000 yards.
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Item Cost - $7.00 Order Cost - $283.00 Annual Hold - 32% of item cost Annual Demand - 22,100 Average Demand - 442 per week Standard deviation of weekly demand 20 per week lead time - 1.
Determine the optimum inventory policy(order quantity, reorder point, calendar days between orders, total annual inventory cost, and projected annual net profit) with the help of the following information:
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