1.) Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter. Their current policy is to order 500 per quarter, with a fixed cost of $30/order. The annual holding cost is 20% of the cost of items held. The following cost structure is applicable:
Order Quantity Price/pair
0-125 $35
126-225 34
226-350 33
351 + 32
For a price of $35, the optimal order quantity (ignoring the price breaks) is ___________. (4)
2.) Redo #1 if they allow backordered items with a shortage cost of $4/year.
Optimal order quantity = ___________. (4)