Total cost that will minimize total inventory costs

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Reference no: EM132163475

A local discount store stocks toy race cars. Recently, the store has received the following discount schedule for these cars. The annual demand for race case is 5000 cars, the ordering costs are $49 per order and the annual carrying costs are 20% percent of the unit price.

a) Indicate the order quantity, price and total cost that will minimize total inventory costs.

Quantity Price

1-699 $5.00

700-1999 $4.80

2000 + $4.75

b) Assume that the discount store would like to have a minimum 2% risk of stockout, and that the lead time varies with an average of 5 days and a standard deviation of 1 day. The store is open 363 days per year. Find the reorder point and amount of safety stock needed.

Reference no: EM132163475

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