Mouse Parts produces mouse ears, white gloves and other parts that are incorpora

Question

Mouse Parts produces mouse ears, white gloves and other parts that are incorporated into the production of Mickey Mouse souvenirs. One of the components used in production has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $1 per unit per year, and ordering cost is $20 per order.

a. To minimize cost, how many units should be ordered each time an order is placed?

b. How many orders per year are needed with the optimal policy?

c. What is the average inventory if costs are minimized?

d. Suppose that the ordering cost is not $20, and Mouse Parts is ordering 150 units each time an order is placed.

For this ordering policy to be optimal, what would the ordering cost have to be?

Explanation / Answer

Mouse Parts produces mouse ears, white gloves and other parts that are incorpora

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