What is the economic order quantity and the re-order level

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A car manufacturing company has an annual demand of 50,000 cars. The company is interested in optimizing its inventory policy for its windshields that are purchased from a vendor. The cost of each windshield is $200. It cost the company $500 every time an order is placed for more units, and the inventory holding cost is $10/unit per year plus a 10% annual cost of capital per windshield. Historical data has shown that the standard deviation of demand is 5units/day for a 365 day year. If the lead time to get an order is 2 days and the car manufacturing company wants to maintain a 97% serviceability.

a) what should the inventory policy be? In other words, what is the economic order quantity and the re-order level?

b) How many orders need to be placed?

c) What is the total ordering cost?

Reference no: EM132176938

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