Monthly demand of an inventory item follows

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Monthly demand of an inventory item follows a mean of 20 units and a variance of 4. Demand of the inventory is 12 units / month. When the inventory reaches a pre-determined level, an order for replenishment is placed. The ordering cost is $60/order/year and the holding cost is 25% of the cost of the item. The cost of the item is $4. The replenishment lead time is 4 months. Furthermore, the Z-value required to achieve a 90% service level (in other words, z90%) is given as 1.28. Based on the data above determine,

a. The Economic Order Quantity (EOQ)

b. Reorder Point (ROP)

c. Safety Stock (SS)

Reference no: EM1385399

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