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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)
2. Redo #1 if they allow backordered items with a shortage cost of
$4/year.
Optimal order quantity = ___________. (4)
