Henderson Furniture sells reproductions of 18th century furniture. For a particular table, the assumptions of the inventory model with backorders are valid. D = 200 tables per year I = 25% per year C = $800 per table Co = $80 per order Cb = $50 per table per year The store is open 250 days a year
a. What are the values for order quantity and number of planned backorders that will minimize total cost?
b. What is the maximum inventory?
c. What is the cycle time?
d. What is total cost?
a. Q* = 28.28
S* = 28.28(200/250) = 22.62
b. 28 ? 23 = 5 tables
c. Cycle time = (28/200)250 = 35 days
d. TC = 89.29 + 571.43 + 473.32 = 1134.04 (using whole numbers of tables for Q and S)
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Ethical issues may arise when management dips into LIFO layers
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