Reference no: EM133173397

Question - Dostyk Inc. is one of the largest retail chains with more than 100 branches in the United States. A key activity of the company is its inventory operation. The company's fastest-moving inventory item has a demand of 80,000 units per year. The inventory carrying cost is $15 per unit per year and cost of each unit is $200. The average ordering cost is $60 per order and it takes approximately 2 days for an order to arrive from the manufacturer. The corporate maintains operations 5 days per week 50 weeks of the year, closing the last two weeks of December. Based on this information provide your responses to the following questions and show your work in determining your responses.

a. How much should Dostyk order each time to replenish its inventory during the year?

b. What is the average inventory level of the item if the amount ordered in part a is used?

c. What is the optimal number of orders per year?

d. What is the optimal number of days in between two consecutive orders (i.e., cycle length)?

e. What is the total annual cost of ordering and holding inventory using the approach you used in part a?

f. What is the total annual cost, including cost of the items, when using the approach in part a?

g. What is the reorder point for the item when using the approach in part a?

h. What is the safety stock level if the company uses a reorder point of 750 units and the quantity in part a?

i. Suppose that the ordering cost is not $60, and Dostyk has been ordering 1,000 units each time an order is placed. For this order policy (of Q=1000), to be optimal, determine what the ordering cost would have to be.