Week

$1$

$2$

$3$

$4$

$5$

$6$

$7$

$24$

$910$

$53$

$30$

Demand $53$

$22$

$32$

$61$

$17$

$37$

$43$

$8$

Bongo's recognizes a carrying cost of $23\%$ per year for their inventory. They pur$-$ chase the ovens from the manufacturer for a wholesale price of $$163$ each. It costs them $$200$ to make one order, including purchase and shipping costs. There is a $2$ week lead time for delivery once the order is made. Bongo's also has a policy of maintaining a $95\%$ customer service level.

a$.$ What should the inventory policy be $($order quantity and reorder point$)?$ Dis$-$ cuss any implications or problems you might see with the inventory policy.

b$.$ The manufacturer has approached Bongo's with an offer to negotiate a price discount if Bongo's will order $500$ ovens at a time. They said they would be able to keep the purchase and shipping costs the same. What is the highest the wholesale price can be and still make the offer an attractive one financially?

c$.$ The person responsible for forecasting demand for appliances has just sent you a note. It states that the market appears to Closeanging and they offer as evi$-$ dence that the MAD for the forecast for microwave ovens has gone from $12$ to $23$ units in only $6$ months. How would you interpret this and what would your response be$?$