Part (A): A local tire distributor for expects to sell 9,600 steel-belted tires of a certain size and tread design next year. Assume that EOQ model assumptions are valid. Each tire costs $50, ordering cost is $80 per order and carrying cost is 15 dollars per unit per year. Assume that the distributor operates 300 days a year.
(i) What is the annual inventory cost if you order 600 units at a time?
(ii) Draw the graph of annual cost for holding, ordering and holding+ ordering (for lot size between 80 and 640 in the increment of 80).
(iii) Determine the “optimal” lot size if your order lot size must be a multiple of 60. For this answer, what is your order policy, that is, (when to order, how much to order); if a delivery lead-time is 20 days? When you are placing an order, how much on hand inventory would you have?