Determine the optimal order quantity-total annual cost

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Reference no: EM131198413

A company is reviewing its inventory policies and notes that they use the basic fixed-order quantity model but make use of safety stock since demand for some items is variable. They estimate that annual demand for a particular product is 15,600 units, the ordering cost is $31.20, the holding cost per unit per year is $0.10, and the cost per unit is $5. In addition, they know that average weekly demand is 300 with a standard deviation during lead time of 90 units, the lead time is 4 weeks, and the service level is 98%. The company works 250 days per year (five days a week for 50 weeks). Determine the optimal order quantity, the total annual cost, the safety stock level, and the reorder point.

Reference no: EM131198413

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