Reference no: EM133295466

A fertilizer plant acquires phosphate from a single source. The plant's annual phosphate requirement has a normal distribution with a mean of 25,000 metric tons and a standard deviation of 1,500 metric tons. The lead time for phosphate supply is 10 days. To place an order, an administrative employee spends around one hour reviewing the inventory level, preparing the order, tracking the delivery, and updating records. When the delivery is received, it takes roughly two worker hours to unload, inspect, and store the material. The administrative staff member is paid $28 per hour and the warehouse employees are paid $18 per worker hour. Delivery charges are $1000 per shipment. The company purchases phosphate at $390 per metric ton. The annual cost of capital is 5%. Other annual costs of holding inventory are estimated to be 5% of the purchase cost. How much should the plant order at a time? What will be the Reorder Point if the desired service level during the lead time is 99%?