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1. Vostick Filter Company is a distributor of air filters to retail stores. It buys its filters from several manufacturers. Filters are ordered in lot sizes of 1000 and each order costs $40 to place. Demand from retail stores is 20,000 filters per month, and carrying cost is $.10 a filter per month. a. What is the optimal order quantity with respect to so many lot sizes? b. What would be the optimal order quantity if the carrying cost were $.05 a filter per month? c. What would be the optimal order quantity if ordering costs were $10?

2. To reduce production start-up costs, Bodden Truck Company may manufacture longer runs of the same truck. Estimated savings from the increase in efficiency are $260,000 per year. However, inventory turnover will decrease from eight times a year to six times a year. Costs of goods sold are $48 million on annual basis. If the required rate of return on investment in inventories is 15%, should the company instigate the new production plan?

3. The Hedge Corporation manufactures only one product: planks. The single raw material used in making planks is the dint. For each plank manufactured, 12 dints are required. Assume that company manufactures 150,000 planks per year, that demand for planks is perfectly steady throughout the year, that it costs $200 each time dints are ordered, and that carrying costs are $8 per dint per year.

a. Determine the economic order quantity of dints. b. What are the total inventory costs for Hedge (carrying costs plus ordering costs)? c. How many times per year would inventory be

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