At what inventory level should she place an order

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Reference no: EM133345574

Case: Paula's company sells 6,100 clippers per year. Each clipper costs her $7. It costs her $5 each time an order is placed, and annual holding costs are 35 percent of the material costs. It takes six weeks for an order to arrive. Weekly demand is 122 clippers with a weekly standard deviation of 35 clippers. Comparing annual demand to weekly demand, you'll see she is closed two weeks per year (the weekly demand is annual demand / 50), but you should not do any additional adjustments in your calculations related to the two weeks she is closed. Paula wants to use a reorder point system with a 90 percent service level during the lead time.

Question 1: What is the economic quantity for Paula to order?

Question 2: At what inventory level should she place an order?

Reference no: EM133345574

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