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?