Analytical Modeling

Deterministic Inventory Problem

$1.$ Ace Hardware$$s demand for Snow Blowers in Chicago averages $500$ units per

month or $6,000$ units per year $($Note: there are $12$ months in a year$).$ Ace

Hardware's ordering costs are $$2,000$ per order. Ordering costs include order

placement, transportation, and receiving. The wholesale price Ace Hardware

pays its vendor is $$250$ per snow blower, and Ace Hardware incurs a holding

cost of $20$ percent.

a$.$ What is the optimal lot size Ace Hardware$$s procurement manager should

order from its vendor? $(50$ pts$)$

b$.$ What is the total annual cost of Ace Hardware$$s optimal replenishment

policy? $(20$ pts$)$

c$.$ What are two $($there are more, but I am only asking for two$)$ assumptions of

the model you used to solve this problem? $(15$ pts$)$

d$.$ Do you believe the model you used to solve $($a$)$ and $($b$)$ is good, given these

assumptions? Please justify your answer. $(15$ pts$)$