Playhouse World is distributor for a Victorian-style playhouse manufactured in Thailand. If the furm is out of stock of this playhouse,it offers customers a discount of $50 for each week they must wait for delivery. The administrative cost of processing a backorder is estimated to be $10. The playhouses cost the firm $3500 each and sell for $6000 each. Demand averages two units per month. Due to the fairly high cost of preparing customs documents, the cost of placing an order is estimated to be $1500 and an order takes approximately one month to arrive. Playhouse World estimates that the annual holding cost for the Victorian style playhouse is $450.
The company wishes to determine how many Victorian playhouses it should order and the approximate percentage of customers who will have to wait for delivery.© BrainMass Inc. brainmass.com March 4, 2021, 7:02 pm ad1c9bdddf
The solution provides calculation of Optimal Inventory Policy for a Planned Shortage Model