Minimization of inventory system cost is the objective

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Reference no: EM132139933

Huckaby Motor Services, Inc. rebuilds small electrical items such as motors, alternators, and transformers, all using a certain type of copper wire. The firm's demand for this wire is approximately normal, averaging 20 spools per week, with a standard deviation of 6 spools per week. Cost per spool is $24; ordering costs are $25 per order; inventory handling cost is $4.00 per spool per year. Acquisition lead time is four weeks. The company works 50, 5-day weeks per year.

a. What is the optimal size of an order, if minimization of inventory system cost is the objective?

b. What are the safety stock and reorder point if the desired service level is 92%?

Reference no: EM132139933

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