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Calculate the optimum ordering quantity for this item

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Reference no: EM131209044

You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 200 units and a standard deviation of 16 units. It is purchased from a wholesaler at a cost of Rs. 12.50 per unit. The supply lead time is 4 weeks. Placing an order costs Rs. 50 and the inventory carrying cost is 20% of the item's cost per year. Assume you operate for 52 weeks in a year.

a. Calculate the optimum ordering quantity for this item?

b. How many units of the item should be maintained as safety stock for 99% protection against stock outs during an order cycle?

c. If the ordering methodology is carried out after every 2 weeks, calculate the safety stock that would be required to maintain against stock outs and compare the same with part (b) above.

d. Calculate the number of turns of inventory in both the cases of (b) and (c).

Reference no: EM131209044

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