Reference no: EM131226161

Johnson Corporation has the following information about a product that carries in stock: Average demand 40 units per day Average lead time 15 days Item unit cost $ 55 for orders less than 400 units Item unit cost $ 50 for orders of 400 units or more Ordering cost $30 Inventory carrying cost 20% The business year is 300 days Standard deviation of demand 2.5 units Standard deviation of lead time 1.5 days Desired service level 97.5% a. What is the annual total acquisition cost of ordering at the $ 55 price? b. What is the annual total acquisition cost of ordering at the $ 50 price? c. What level of safety stock should Johnson maintain for the item? d. If Johnson chooses the ordering policy that results in the lowest total annual acquisition cost, and maintains the safety stock level for 97.5 percent service, what will Johnson’s average inventory be for this item? e. What will the annual inventory turnover rate be for this item? f. What will the reorder point be for the item?