The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 40 cars per month. The cars cost $60 each, and ordering costs are approximately $15 per order, regardless of the order size. The annual holding cost rate is 20%. Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted. If required, round your answers to two decimal places.Q* = fill in the blank 1Total Cost = $ fill in the blank 2Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars. If required, round your answers to two decimal places.S* = fill in the blank 3Total Cost = $ fill in the blank 4What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year. If required, round your answer to two decimal places.Length of backorder period = fill in the blank 5 daysWould you recommend a no-backorder or a backorder inventory policy for this product? Explain. If required, round your answers to two decimal places.Recommendation would be inventory policy, since the maximum wait is only fill in the blank 7 days and the cost savings is $ fill in the blank 8.If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies? If required, round your answers to two decimal places.Reorder point for no-backorder inventory policy is fill in the blank 9.Reorder point for backorder inventory policy is fill in the blank 10.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 40 cars per month. The cars cost $60 each, and ordering costs are approximately $15 per order, regardless of the order size. The annual holding cost rate is 20%.

Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted. If required, round your answers to two decimal places.

Q^* = fill in the blank 1

Total Cost = $ fill in the blank 2
Using a $45 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars. If required, round your answers to two decimal places.

S^* = fill in the blank 3

Total Cost = $ fill in the blank 4
What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year. If required, round your answer to two decimal places.

Length of backorder period = fill in the blank 5 days
Would you recommend a no-backorder or a backorder inventory policy for this product? Explain. If required, round your answers to two decimal places.

Recommendation would be inventory policy, since the maximum wait is only fill in the blank 7 days and the cost savings is $ fill in the blank 8.
If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies? If required, round your answers to two decimal places.

Reorder point for no-backorder inventory policy is fill in the blank 9.

Reorder point for backorder inventory policy is fill in the blank 10.

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