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Annual demand for the Dobbs model airplane kit is 80,000 units. Albert Dobbs, president of Dobbs' Terrific Toys, controls one of the largest toy companies in Nevada. He estimates that the ordering cost is $40 per order. The carrying cost is $7 per unit per year. It takes 25 days between the time that Albert places an order for the model airplane kit and the time when they are received at his warehouse. During this time, the daily demand is estimated to be 450 units.
(a) Compute the EOQ, ROP, and optimal number of orders per year.
(b) Albert Dobbs now believes that the carrying cost may be as high as $14 per unit per year. Furthermore, Albert estimates that the lead time may be 35 days instead of 25 days. Redo part (a), using these revised estimates.
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