Explain what is the economic order quantity

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Reference no: EM1351078

a distributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. the following data refer a specific refrigerator in its product line

Cost to place an order: $100

Holding Cost: 20 percent of product cost per year.

Cost of refrigerator: $500 each.

Annual demand: 500 refrigerators.

Standard deviation during lead time: 10 refrigerators.

Lead time: 7 days.

Consider an even daily demand and a 365-day year.

A. What is the economic order quantity?

B. If the distributor wants a 97% service probability, what reorder point R should be used? What is the corresponding safety stock?

Reference no: EM1351078

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