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A firm uses a continuous review system and operates 300 days per year. One of its items has an annual demand of 21,000 units. Ordering costs are $60 per order and holding costs are $4 per unit per year. Lead time is 4 days and the standard deviation of demand during these 4 days is 30 units. A service level of 95% is desired. The current on hand inventory is 340 units, with no backorders or scheduled receipts. Round all answers to nearest whole number.
What is the optimal order quantity?
What is the average time, in days, between orders?
What is the reorder point required to meet the 95% service level?
A withdrawal of 20 units has just occurred. Is it time to place an order, and if so how much should be ordered?
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