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A small hospital purchases units of red blood from a local blood collection agency. The hospital uses 2,000 units monthly and pays $227.45 per unit. The cost per order is $145.00. The cost of capital is 11% and the handling and storage costs are 9% of the item cost.
Part 1:
1) Determine the EOQ and the total annual inventory cost.
2) The blood collection agency provides a $2,000 rebate/year for customers that order a minimum of 750 units for each order. Determine how much the hospital would save or lose each year if it accepted the suppliers offer.
Part 2:
3) The hospital operates 365 days per year and the lead time to order blood is 3 weeks. Determine the reorder point and the average time between orders in days.
4) The hospital is concerned with fluctuating demand and would like to maintain safety stock with a 95% service level. If the historical standard deviation of weekly demand is 160 units, what should the new reorder point be?
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