1. Bart's Barometer Business (BBB) is a retail outlet that deals exclusively with weather equipment. Currently, BBB is trying to decide on an inventory and reorder policy for home barometers. These cost BBB $50 each and demand is about 500 per year distributed fairly evenly throughout the year. Reordering costs are $60 per order and holding costs are figured at 20% of the cost of the item. BBB is open 300 days a year (6 days a week and closed two days in August). Lead time is 60 working days.
a. What is the optimal reorder quantity?
b. What is the reorder point?
c. How many times a year would BBB reorder?
d. What are total annual inventory costs?
2. The publishers of the Fast Food Restaurant Menu Book wish to determine how many copies to print. They can sell each menu book for $2.00. The per-unit cost to produce a copy is $1.45. The typical sales volume is 12,000 with a standard deviation of 2,000.
a. If any unsold copies are tossed in the trash, how many copies should the publishers print?
b. If any unsold copies can be sold at salvage for $1.35, how many copies should the publisher print?