Q. Wiley's TV Town sells VCR's. Weekly demand has averaged 40 VCR's per week. Wiley makes a gross profit of $50 per VCR sold (not including inventory costs). Holding costs are $260 per VCR per year also reorder costs are $42 per order. Lead time is 1 week also store operates 52 weeks in a year.

a) Evaluate: (I) optimal number of VCR's Wiley should order (integer value) (ii) cycle time (in weeks); also, (iii) his yearly net profit.

b) Wiley is considering allowing backorders. Wiley intends to offer consumers a discount of $20 per week for each week consumer must wait for a VCR. Wiley estimates which this policy will result in a drop in demand to 36 VCR's per week. Order also holding costs will remain same. Should Wiley adopt this policy? Explain why or explain why not? Illustrate what is maximum backorder?