Question: 7.12 Air Alberta has been using an (s, Q) control system for a fast-moving spare part for one of its types of aircraft. The properties

7.12 Air Alberta has been using an (s, Q) control system for a fast-moving spare part for one of

its types of aircraft. The properties of this part are

D = 1,920 units/year A = $15

v = $20.00/unit r = 0.2$/$/year

xL = 150 units L = 60 units

Whenever a shortage is impending, an expediting action is taken, avoiding the shortage. The

cost of such an expedite is roughly $200, independent of the magnitude of the impending

shortage. The company uses an EOQ as the order quantity.

a. Determine the EOQ and s.

b. What are the expected total relevant costs (replenishing, carrying, and expediting) per

year?

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