February 7, 2021
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February 7, 2021

QM 670 Exam II

1. Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter. Their current policy is to order 500 per quarter, with a fixed cost of \$30/order. The annual holding cost is 20% of the cost of items held. The following cost structure is applicable:
 Order Quantity Price/pair 0-125 \$35 126-225 34 226-350 33 351+ 32

For a price of \$35, the optimal order quantity (ignoring the price breaks) is ___________. (4)

• Redo #1 if they allow backordered items with a shortage cost of \$4/year.

Optimal order quantity = ___________. (4)

1. Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter. Their current policy is to order 500 per quarter, with a fixed cost of \$30/order. The annual holding cost is 20% of the cost of items held. The following cost structure is applicable:
 Order Quantity Price/pair 0-125 \$35 126-225 34 226-350 33 351+ 32

The optimal order quantity is ______________. (5)

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