A high end car dealership orders engine control modules (ECMs) from a distributor with a three week lead time The dealership does an average of six ECM replacement jobs per week for the 52 week year Demand for those jobs is normally distributed with a variance of four per week The dealership's cost for the ECMs is $1,600 per unit plus a $450 fixed cost per order Current rates put the price for each ECM replacement job at $1,770 Assume a 10 annual inventory carrying charge a What is the dealership's optimal ECM order quantity b What is the dealership's optimal ECM reorder point c Approximately how much does the dealership incur annually on ECM inventory holding and ordering costs

Question: A high-end car dealership orders engine control modules (ECMs) from a distributor with a three-week lead time. The dealership does an average of six ECM

A high-end car dealership orders engine control modules (ECMs) from a distributor with a three-week lead time. The dealership does an average of six ECM replacement jobs per week for the 52-week year. Demand for those jobs is normally distributed with a variance of four per week. The dealership's cost for the ECMs is $1,600 per unit plus a $450 fixed cost per order. Current rates put the price for each ECM replacement job at $1,770. Assume a 10% annual inventory carrying charge.
a. What is the dealership's optimal ECM order quantity?
b. What is the dealership's optimal ECM reorder point?
c. Approximately how much does the dealership incur annually on ECM inventory holding and ordering costs?

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