Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 10

Videoworld is a discount store that sells color televisions. The annual demand for color television sets is 400. The cost per order from the manufacturer is $650. The carrying cost is $45 per set each year. The store has an inventory policy that allows shortages. The shortage cost per set is estimated at $60. Determine the following:
a. The optimal order size
b. The maximum shortage level
c. The minimum total annual inventory cost