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A manager of inventory systems believes that inventory models are important decision- making tools. The manager often uses an Economic Order Quantity policy, but has never considered a backorder model, because the company has always treated backorders as a bad practice to be avoided. However, with upper management's continued pressure to cut costs, you have been asked to analyze the economics of a backorder policy for some products. A specific product has annual demand of 800 units, an order cost of $150/order, an annual holding cost of $3/item, and a backorder cost of $20/item. Your task it to determine the annual savings, when compared with an EOQ model, that backorders would allow. Assume 250 working days per year.

A manager of inventory systems believes that inventory models are important decision- making tools. The manager often uses an Economic Order Quantity policy, but has never considered a backorder model, because the company has always treated backorders as a bad practice to be avoided. However, with upper management's continued pressure to cut costs, you have been asked to analyze the economics of a backorder policy for some products. A specific product has annual demand of 800 units, an order cost of $150/order, an annual holding cost of $3/item, and a backorder cost of $20/item. Your task it to determine the annual savings, when compared with an EOQ model, that backorders would allow. Assume 250 working days per year.

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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A manager of inventory systems believes that inventory models are important decision- making tools. The manager often uses an Economic Order Quantity policy, but has never considered a backorder model, because the company has always treated backorders as a bad practice to be avoided. However, with upper management's continued pressure to cut costs, you have been asked to analyze the economics of a backorder policy for some products. A specific product has annual demand of 800 units, an order cost of $150/order, an annual holding cost of $3/item, and a backorder cost of $20/item. Your task it to determine the annual savings, when compared with an EOQ model, that backorders would allow. Assume 250 working days per year.
Transcribed Image Text:A manager of inventory systems believes that inventory models are important decision- making tools. The manager often uses an Economic Order Quantity policy, but has never considered a backorder model, because the company has always treated backorders as a bad practice to be avoided. However, with upper management's continued pressure to cut costs, you have been asked to analyze the economics of a backorder policy for some products. A specific product has annual demand of 800 units, an order cost of $150/order, an annual holding cost of $3/item, and a backorder cost of $20/item. Your task it to determine the annual savings, when compared with an EOQ model, that backorders would allow. Assume 250 working days per year.
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