Planned shortage inventory model for order quantity

Reference no: EM13120431

TV King sells Nison P-42 LCD TV. Demand for TV averages 60 units per month. Nison P-42 costs $1,200 each. Assuming the annual holding cost is $500. If King is out of stock, it offers customers a discount of $15 per week. The cost of placing an order is $1200. The administrative cost of placing a costumer on backorder is estimated to be $20. The planned shortage inventory model recommends order quantity Q* = 70 and shortage level S = 18. Which of the following statement is incorrect? (all numbers are rounded to nearest integer)

a. Annual inventory holding cost is $17,500
b. Assuming TV King operates 365 days a year, there will be 272 days TV King has Nison P-42 in stock
c. Time-independent shortage cost is $2,777
d. Time-dependent shortage cost is $2,407
e. None of the above

Reference no: EM13120431

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