Determine the optimal inventory policy

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It costs $10,000 to place an order and $400 to review the inventory level. Annual tire sales are N(20,000,4,000,000). it costs $10 per year to hold a tire in inventory, and each order arrives two weeks after being placed. 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.

Reference no: EM131042282

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