Big Builder (BB) sells construction equipment such as concrete mixer, wheelbarrow, and angle grinders to highway agencies who use them for road construction. BB receives orders from multiple agencies via email and post. It costs BB £25 to process an order and the combined demand from multiple agencies is 3,000 units per year. The holding cost is £55 per item per year and unit cost is £1,100. Items are imported from Germany and stock is received 7 working days after an order is placed. No backordering is allowed. Assume 220 working days a year.
a. What is BB's optimal order quantity?
b. What is the optimal number of orders per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
e. What is the reorder point?
f. What are the total annual costs?