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Operations Management

The Wheeling Pottery Store begins each month with 1200 pots in stock. This stock is depleted each month and reordered. If the carrying cost per pot is $8 per year and the fixed order cost is $90, what is the total carrying cost?

What is the restocking cost? Should Wheeling increase or decrease its order size?

Describe an optimal inventory policy for Wheeling in terms of order size and order frequency.

Solution Preview

Carrying Cost (H)= $8
<br>Ordering Cost (S)= $90
<br>Batch Size (Q) = 1200
<br>Total Carrying Cost = Q/2*H
<br> = 1200/2 * 8= $4800.
<br>Annual Restocking Cost = S* No of ...