What is the optimal reorder point and reorder quantity

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Hoosier Woods. Inc. (HWI), manufactures top-end hardwood chairs that are sold through a variety of retail outlets. The most popular model sells for $750 per chan and costs $600 to produce. Past data shows that average monthly demand is 1,500 chans with a standard deviation of 300 chairs and that the normal distribution is a reasonable fit. HWI uses a 20 percent annual interest charge to estimate inventory carrying costs. Assume that setup costs are negligible, lead time is 0, and backorder cost = $40/unit/month. Suppose the company orders periodically once a month and all unfulfilled orders are backordered. What order-up-to level should HWI use? If the company orders periodically once a month and any order unfulfilled immediately is lost, what order-up-to level should HWI use? If all unfulfilled orders are backordered, fixed setup cost is $5,000, and the lead time is 1 month, what is the optimal reorder point and reorder quantity when the company uses the (Q, r) model?

Reference no: EM131275412

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