Exhibit 12-3The North Slope Clothing Store Chain Sells Approximately 26,000

Essay

Exhibit 12-3The North Slope clothing store chain sells approximately 26,000 units of its most popular cotton sweater each year. North Slope buys these sweaters from a manufacturer located in Canada. The fixed cost of placing an order for this particular product is $200. North Slope pays $10 for each cotton sweater. The company's cost of capital is 11%, and the cost of storing a sweater for one year is $1.10. While North Slope prefers not to backlog customer demand, management of the company believes that it can afford to run out of sweaters on an occasional basis. The company estimates that the shortage cost per sweater per year is about $20.
-Refer to Exhibit 12-3. Formulate a Solver model and find the optimal order quantity for the cotton sweaters. What is the optimal order? How much, if any, is the maximum backlog?