Kathy owns a neighborhood hot dog stand, and wants to determine some good order policies for hot dogs. She estimates her annual demand to be constant and equal to 10,000 hot dogs. her order cost is $20, the carrying cost rate is 40% per year, the purchase cost is $0.20 per hot dog, and the order lead time is two days.
What is the optimal order quantity, annual order cost, annual inventory carrying cost and the relevant total annual inventory cost? What is the reorder point, and optimal order policy?