Washington Metro Bus Inc. operates a fleet of 400 buses. The fleet includes buses used for public transit as well as school buses. Buses used in public transit average close to 400 miles per day, seven days a week. School buses also amass considerable mileage, though not nearly as much as public transit bus. Metro Bus is interested in setting up inventory policy for bus tires that minimizes the sum of annual ordering and carrying cost. All buses use the same type of tires and the annual requirement of tires are 5000. Ordering cost per order is $125, and the cost for carrying a tire annually in inventory is $20. For practically purposes, the lead time is zero, as the supplier agrees they will deliver on the day the order is placed. Note that the basic unit of measurement for a period is one year in this case.

Problem:

1. What is the Economic Order Quantity (EOQ)?
2. Compute the optimal number of orders each year?
3. What is the length of the inventory cycle?