Find the optimal review and order interval

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Reference no: EM131637797

Using a periodic review system, the Budget T - shirt Store currently reviews inventory of its basic T - shirt every 45 days. The shirt has an annual demand forecast of 4, 500 shirts. Its ordering cost is exist50, and its inventory carrying cost is 15% per dollar per year. The cost of each shirt is exist10. The purchase order lead time is 6 days and the average daily demand is 15 shirts, with a daily standard deviation of 3 shirts. Budget T - shirt operates 300 days a year and would like to maintain a 95% service level.

a) Suppose the company just finished the periodic review and found that on - hand inventory is 50 shirts, how many shirts should be ordered (i.e. amount to order)?

b) Calculate EOQ and use it to find the optimal review/order interval (OI), rounding the number to the nearest integer day.

Reference no: EM131637797

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