Business, 04.05.2021 15:40 bob231280

An automotive warehouse stocks parts that are sold at nearby dealers. One particular part, a popular brand of oil filter, is purchased by the warehouse for $1.50 each. The fixed setup cost (of order processing and receipt) is $100 per order. The inventory carrying charge is based on a 28% annual interest rate. Assume that if a filter is demanded when the warehouse is out of stock, then the demand is backordered, and the cost assessed for each backordered demand is $1.28. Determine the following quantities:a. The optimal values of the order quantity and the reorder level. b. The average annual cost of holding, setup, and stock-out associated with this item assuming that an optimal policy is used. c. Evaluate the cost of uncertainty for this process. That is, compare the average annual cost you obtained in part (b) with the average annual cost that would be incurred if the lead time demand had zero variance.

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An automotive warehouse stocks parts that are sold at nearby dealers. One particular part, a popular...

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