1. The soft goods department of a large department store sells 150 units per month of a certain large
bath towel. The unit cost of a towel to the store is $10 and the cost of placing an order has been estimated to be $160. The store uses an inventory carrying charge of 25% of unit cost per year. (7 marks)
(i) Find the optimal order quantity that minimizes the total cost.
(ii) What is the number of orders per year?
(iii) What is the total annual cost?
(iv) Assume that the parameters given in the problem were wrong. Using the correct parameters, we calculated the optimal order quantity again and obtain 385.333. However, the number of towels in each order should be integer. How many service representatives should be in each training group? How would you find optimal integer order quantity? Explain your approach and why it is working. (You do not need any calculation.)
2. How do you test the initial feasible solution of transportation problem for degeneracy?
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