Explain what is the economic order quantity

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Reference no: EM1351689

High Tech, Inc. is a virtual store that stocks a variety of calculators in the warehouse. Customer orders are placed, the order is
picked and packaged, and then shipped to the customer. A fixed order quantity inventory control system (FQS) helps monitor and
control these SKU's. The following information is for one of the calculators that they stock, sell and ship.

average demand 12.5 calculators per week

lead time 3 weeks

order cost $20/order

Unit cost 8.00

carrying charge rate 0.15

number of weeks 52 weeks per year

standard deviation of weekly demand 3.75 calculators

SKU service level 90 percent

current on hand inventory 35 calculators

scheduled receipts 20 calculators

backorders 2 calculators

a. What is the Economic Order Quantity?

b. What is the total annual order and inventory holding costs for the EOQ?

c. What is the reorder point without safety stock?

d. What is the reorder point with safety stock?

e. Based on the previous information, should a fixed order quantity be placed, and if so, for how many calculators?

Reference no: EM1351689

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