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Annual demand for an automotive part is 40,500 parts per year, occurring at a constant rate. The annual holding cost for the part is estimated to be $2.50 per part and the cost of placing each order is $125.00. The factory producing the parts operates 365 days per year.
a) What is the optimal order quantity (fractional quantities ok)?
b) How many orders for the quantity in part (a) are placed each year?
c) What is the time between orders, in days?
d) What is the total annual cost associated with this inventory policy?
e) If it takes 5 days from the time an order is placed until the order is received, at what level of remaining inventory should an order be placed?
f) If the order quantity must be an integer, what order quantity would you recommend?
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