Consider a basic economic order quantity (EOQ) model with the following characteristics:
Item cost: $15
Item selling price: $20
Monthly demand: 500 units (constant)
Annual holding cost: $1.35 per unit
Cost per order: $18
Order lead time: 5 working days
Firm's work year: 300 days (50 weeks @ 6 days per week)
Safety stock: 15% of monthly demand
For this problem, determine the values of:
a) Q* the optimal order quantity and reorder point.
b) M, the maximum quantity in inventory.
c) T, the cycle time
d) total annual inventory cost
e)what is the annual ordering cost?
f) suppose the vendor demands purchases in multiples of 500 only what is the increase in total annual inventory cost that this cause
g) What is the average lead time demand?
h)If the standard deviation of the lead time demand is 10 units,what is the cycle service level with the given safety
i) If the standard deviation of the lead time demand is 10 units, what would be the safety stock if cycle service level is 99%?
j) Assuming cycle service level of over 99% is not advisable, what is the annual cost of carrying unnecessary safety stock?
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