Determine order quantities-what is economic order quantity

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A distributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. The following data refer to a specific refrigerator in its product line: Cost to place an order $100 Holding cost 20 percent of product cost per year Cost of refrigerator $500 each Annual demand 500 refrigerators Standard deviation during lead time 10 refrigerators Lead time 7 days Consider an even daily demand and a 365-day year. 2 a) What is the economic order quantity? b) If the distributor wants a 97 percent service probability, what reorder point, R, should be used? (z=1.90 for 97%.)

Reference no: EM13960794

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