Reference no: EM13967832
A firm desires to control inventory levels so as to minimize the sum of holding and order costs. It costs the firm $50 to place an order. The firm estimates its annual carrying charge is 20%. Weekly demand is 100 units, and there are 50 weeks in the work year. The item costs $10 per unit. The lead-time for the product is 3 weeks. Assume that there are 5 working days per week.
A) What quantity of items should the firm order each time so as to minimize total inventory costs, i.e., what is the EOQ?
B) If 400 units are ordered each time (i.e., EOQ = 400), then what will be the total carrying cost per year?
C) If 200 units are ordered each time, how many orders will be placed in a year?
D) If 200 units are ordered each time, then the time between orders (in working days) is
E) If 1000 are ordered each time, then what will be the total ordering cost per year?
F) Using the same information, and assume no safety stock or service level requirement. In order not to run out of stock before the receipt of a new order, at what inventory level should the firm place an order? That is, what is the reorder point equal to?
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