Speedy Wheels is a wholesale distributor of bicycles. Its Inventory Manager, Ricky Sapolo, is currently reviewing the
Question:
(a) Use the basic EOQ model to determine the optimal order quantity and the total variable inventory cost per year.
(b) Speedy Wheel’s customers (retail outlets) generally do not object to short delays in having their orders filled. Therefore, management has agreed to a new policy of having small planned shortages occasionally to reduce the variable inventory cost. After consultations with management, Ricky estimates that the annual shortage cost (including lost future business) would be $150 times the average number of bicycles short throughout the year. Use the EOQ model with planned shortages to determine the new optimal inventory policy.
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Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
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