Determine the distributor's optimal ordering policy.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...
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A Mercedes dealer must pay $20,000 for each car purchased. The annual holding cost is estimated to be 25% of the dollar value of inventory. The dealer sells an average of 500 cars per year. He considers the lawsuit to be behind schedule but estimates that if he is short on one car in one year he will lose $20,000 worth of future profits. Each time the dealer places an order for automobiles, the ordering cost adds up to $10,000. Determine the distributor's optimal ordering policy. What is the maximum deficit that will occur? What is the total annual cost?

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ISBN:
9781337406659
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Cengage,