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1. The demand for a particular part called SKU 005 is 2,400 units a year. The cost of one SKU 005 is $98.00. It costs $38.00 to place an order of SKU 005, and the holding cost per unit per year is 25% of unit cost.
a. What is the combined annual holding and ordering cost of an order size of 200 units for SKU 005?
b. What is the economic order quantity for SKU 005?
c. The vendor who sells SKU 005 has just offered a 3% discount for orders of 600 or more. Now how many should be ordered?
2. A carpet cleaning firm uses an average of 48 gallons of cleaning fluid a day. Usage tends to be normally distributed with a standard deviation of 7 gallons during lead time. Lead time is 3 days, and the desired service level is 96 percent. What is the most appropriate reorder point and safety stock level for this carpet cleaning firm?
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