HoldM4U Company distributes a specialized air purifier.They are considering allowing backorders,with an estimated cost of $200 per unit per year.The annual demand is 81,000 units,the annual holding cost is 10% of the item cost and the unit cost of this item is $1,000.The ordering cost is $500 per order.
a.Determine the optimal order quantity and total annual inventory cost using the basic EOQ model with no backorders.
b.Determine the optimal order quantity and backorder quantity and total annual inventory cost using the EOQ with planned shortages model.
c.Should the company allow backorders?

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The Answer of HoldM4U Company distributes a specialized air purifier.They are considering allowing backorders,with an estimated cost of $200 per unit per year.The annual demand is 81,000 units,the annual holding cost is 10% of the item cost and the unit cost of this item is $1,000.The ordering cost is $500 per order.
a.Determine the optimal order quantity and total annual inventory cost using the basic EOQ model with no backorders.
b.Determine the optimal order quantity and backorder quantity and total annual inventory cost using the EOQ with planned shortages model.
c.Should the company allow backorders?

HoldM4U Company Distributes a Specialized Air Purifier