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 $80 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 weeks in August). Lead time is 60 working days.
A) Develop a total cost model for this system.
B) What is the optimal reorder quantity?
C) What is the cycle time?
D) What is the reorder policy for BBB?
E) What total annual cost does the model give?