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Allow for uncertainties in the market

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Please see the problem set out below, and answer A & B. Please show all your steps in arriving at the answer. Clearly state the definitions of terms used, and also state any formulas used.

A. The BOYLEN OIL COMPANY sells empty barrels. The forecasted annual demand for its barrels is 1600. The order processing cost is $10, and inventory holding cost is $25 per item per year. How many barrels should it order in one shipment?

B. The BOYLEN OIL COMPANY has set its order quantity at 35. However, to allow for uncertainties in the market, it wants to hold 2 weeks of safety stock. What should its reorder point be, if the delivery time is 1 week.

Reference no: EM131200873

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