What level of safety stock should johnson maintain for item

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Reference no: EM132124195

Johnson Corporation has the following information about a product that it carries in stock:

Average demand = 60 units per day

Average lead time = 10 days Item unit cost = $77 for orders of less than 400 units

Item unit cost = $64 for orders of 400 units or more Ordering cost = $45 Inventory carrying cost = 20%

The business year is 300 days

Standard deviation of demand = 2.8 units

Standard deviation of lead time = 1.7 days

Desired service level = 90%

a. What is the annual total acquisition cost of ordering at the $77 price? (Do not round intermediate calculations. Round your calculation for EOQ to the nearest whole number and final answer to 2 decimal places.)

b. What is the annual total acquisition cost of ordering at the $64 price? (Round your answer to 2 decimal places.)

c. What level of safety stock should Johnson maintain for the item? (Do not round intermediate calculations. Round up your answer to the next whole number.)

d. If Johnson chooses the ordering policy that results in the lowest total annual acquisition cost, and maintains the safety stock level for 90 percent service, what will Johnson’s average inventory be for this item?

e. What will the annual inventory turnover rate be for this item? (Round your answer to 1 decimal place.)

f. What will the reorder point be for the item?

Reference no: EM132124195

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