I. Goodear Tire Distributors buys about 48,000 tires over the course of the year at a cost of $20 each from its parent company, Goodear Tire Inc., for resale to local retailers. Each order incurs a fixed cost of $75 for processing and delivery charges and arrives 1 week after the order is placed. Assuming an annual carrying cost = 25 percent of the unit cost, determine the following: Assume Goodear operates 50 weeks a year.

a) The optimal order quantity
b) The reorder point
c) The number of orders per year
d) The total annual cost.

II. Management has learnt that the ordering cost of $75 was underestimated by $50. What is the total annual cost of the optimal policy derived on the basis of an ordering cost of $125 instead of $75.

Answer rating: 100% (QA)

Solution Answer Given that Annual Demand D 48000 Ordering Cost S 75 Unit Cost C 20 Holding Cost H 02... View the full answer