QUESTION 1 The Jubail Bicycle Shop operates 7 days per week, closing 5 days each for...

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QUESTION 1 The Jubail Bicycle Shop operates 7 days per week,closing 5 days each for Eid-ul-Fitr and Eid- Ul -Adah (this gives355 working days in a year). The shop pays SAR 600 for a particularbicycle purchased from the manufacturer. The annual holding costper bicycle is estimated to be 25% of the SAR value of inventory.The shop sells an average of 25 bikes per week. Frequently, thedealer does not have a bike in stock when a customer purchases it,and the bike is back ordered. The dealer estimates his shortagecost per unit back-ordered, on an annual basis, to be SAR 400 dueto lost future sales (and profits) and the lead time is 2 weeks.The ordering cost for each order is SAR 300. Determine thefollowing a. [1 Mark] Optimal order quantity b. [1 Mark] Shortagelevel (Maximum number of back orders) c. [1 Mark] Total minimumcost. d. [1 Mark] Optimal ordering policy e. [1 Mark] How long willthere be stock out?

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SolutionGiven thatThe Jubail Bicycle Shop operates 7 days per week closing 5 dayseach for EidulFitr and Eid Ul Adah this gives 355 working daysin a year The shop pays SAR 600 for a particular bicyclepurchased from the See Answer

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