Question: (16 points) VII. American Airlines is trying to develop an inventory policy for maintaining its tires on its fleet of Boeing 737's. Annual demand for

(16 points) VII. American Airlines is trying to

(16 points) VII. American Airlines is trying to develop an inventory policy for maintaining its tires on its fleet of Boeing 737's. Annual demand for tires runs 36,500 per year and the ordering cost is $1000.00 per order. The carrying cost is 30% of the purchase price and each tire costs $2000. Lead times on orders are three weeks and the company insists on a safety stock of 2000 tires. Since the company flies 365 days a year, assume every day is a business day. (3) What is the optimal EOQ? (3) What is the optimal total inventory cost? (3) What is the reorder point, assuming 2000 tires in safety stock? (4) How many orders go out in a year? What is the average time in days (assuming 365 days/yr) between orders? (3) Suppose the standard deviation of daily demand on tires is 10 tires. In your opinion, is 2000 tires too much safety stock, if the company wants to be 99% certain it has sufficient tires on hand? Why or why not

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