The A&M Hobby Shop carries a line of radio-controlled modelracing cars. Demand for the cars is assumed to be constant at arate of 30 cars per month. The cars cost $51 each, and orderingcosts are approximately $12 per order, regardless of the ordersize. The annual holding cost rate is 19%.
- Determine the economic order quantity and total annual costunder the assumption that no backorders are permitted. If required,round your answers to two decimal places.
Q* =
Total Cost = $
- Using a $50 per-unit per-year backorder cost, determine theminimum cost inventory policy and total annual cost for the modelracing cars. If required, round your answers to two decimalplaces.
S* =
Total Cost = $
- What is the maximum number of days a customer would have towait for a backorder under the policy in part (b)? Assume that theHobby Shop is open for business 300 days per year. If required,round your answer to two decimal places.
Length of backorder period = days
- Would you recommend a no-backorder or a backorder inventorypolicy for this product? Explain. If required, round your answersto two decimal places.
Recommendation would be - Select your answer-backorderno-backorderItem 6 inventory policy, since the maximumwait is only days and the cost savings is$ .
- If the lead time is six days, what is the reorder point forboth the no-backorder and backorder inventory policies? Ifrequired, round your answers to two decimal places.
Reorder point for no-backorder inventory policyis .
Reorder point for backorder inventory policy is .
