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What is inventory-carrying cost pump year

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Alice opens an aquarium store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory-control methods, such as using a fixed-order quantity (FQS) and/or fixed-order period (FPS) systems. The FLUVAL 303 Pump, a high margin and profitable pump, is one of her best sellers, but it stocks out frequently. You collect the following data with respect to this pump's sales.

Demand = five units week Store open 50 weeks/year
Order cost = $40/order Lead-time = three weeks Item cost = $80/pump Std. deviation in weekly demand = 6
Inventory-holding cost = 15 percent year Service level = 96 percent

-What is inventory-carrying (holding) cost pump year?
-What is the economic order quantity ?
-What is the average number of orders per year if using the EOQ?
-What is the reorder point without safety stock?
-What is the safety stock quantity?
-What is the reorder point with safety stock?
-If the current order quantity used by Alice is 20 pumps per order, how much money can she save by adopting an EOQ ordering policy?

Reference no: EM132708796

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