What is the average annual holding cost

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Reference no: EM13224911

Bronco store also sells exquisite dinnerware. Due to the fact that dinnerware is fragile, the store tends to lose some of the inventory while handling the inventory. To have the correct count of the dinnerware packs you ask your staff to take a count monthly and based on that count you decide how large your order size should be. The purchasing cost of each set of dinnerware is $80. The daily demand for that set is normally distributed with an average of 50 and standard deviation of 10. It costs $100 to ship a new order of dinnerware and the leadtime for ordering new packs is 10 days. The annual storage cost is $2 per unit. The interest rate is still 10% and the CEO still prefers a service level of 98%. The store uses the periodic review system for the dinnerware.

How many dinnerware packs do you need to keep as safety stock to satisfy the CEO's targeted service level?
If after the count there are 200 packs of dinnerware available in your warehouse how many packs should we order?

To report to the shareholders the CEO needs the following information from you.

If at the beginning of the year we started with an empty warehouse what is the average annual setup cost for the dinnerware?

What is the average annual holding cost?

What is the inventory turn (per year)?

Reference no: EM13224911

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