Chicago's Treadway Tires Dealer must order tires from its national warehouse. It costs $10000 to place an order and $400 to review the inventor level. Annual tire sales are N(20000, 4000000). It costs $10 per year to hold a tire in inventory, and each oerder arrives two weeks after being placed ( 52 weeks = 1 year). Assume that all shortages are backlogged.
a) Estimate R and the number of orders per year that should be placed.
b) Using the answer in part (a), determine the optimal (R,S) inventory policy. Assume that the shortage cost is $100 per tire.