Problem:
TJ & T Auto purchases a component used in the manufacture of automobile generators directly from the supplier. TJ & T's generator production, which is operated at a constant rate, will require 12,000 components a year. Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and annual holding costs are charged at 20%. There are 250 working days per year and the lead time is 5 days. The management decided to operate with a backorder in inventory policy. Backorder costs are estimated to be $5.00 per unit per year. Compute the following:
a) The maximum inventory level.
b) The maximum number of backorders.
c) The time between orders (in working days).
d) The costs associated with this analysis