The Samuels Manufacturing Company sells a product with a demand of 7,000 units each year. The cost per order is $25, the holding cost is $1 per unit per year and the stock out/shortage/backorder cost is $4 per unit per year. Assume a working year of 250 days. Show your work.
A) What is the optimal quantity to order?
B) What is the optimal number of backordered units to allow per cycle?
C) What is the optimal peak inventory level?
D) What is the optimal number of orders per year (optimal ordering frequency)?
E) What is the optimal time between orders, ie. optimal cycle time (in days)?
F) Find the optimal (minimum) total annual cost.
G) Find the optimal average backorder level.
H) Find the optimal average inventory.