Consider the Avionic Manufacturing Company that wishes to meet a demand of 10 units per month by purchasing the items from a vendor with a lead time of three-quarters of a month. The item cost is $2.50 per unit, replenishment cost is $3.50 per order, and the holding cost is $0.50 per unit per month. The company estimates the shortage cost to be $0.20 per unit per month. By letting the period be one month, one has D = 100, Cu = 2.5, Ch= 0.50, Cr = 3.50, Cs= 0.20 and L = 0.75. What is the optimal inventory policy and the total cost of the system under the optimal policy?
1 answer