Assignment:
Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year.
| Item cost |
$ |
7.00 |
|
Standard deviation of weekly demand |
25 |
per week |
| Order cost |
$ |
210.00 |
|
Lead time |
1 |
week |
| Annual holding cost (%) |
|
27 |
% of item cost |
Service probability |
99 |
% |
| Annual demand |
|
27,000 |
|
|
|
|
| Average demand |
|
540 |
per week |
|
|
|
a. Determine the order quantity and reorder point. (Use Excel’s NORMSINV( ) function to find your z-value and then round that z-value to 2 decimal places. Do not round any other intermediate calculations. Round your final answers to the nearest whole number.)
Optimal order quantity units
Reorder point units
b. Determine the annual holding and order costs. (Do not round any intermediate calculations. Round your final answers to 2 decimal places.)
Holding cost $
Ordering cost $
c. Assume a price break of $50 per order was offered for purchase quantities of 2,500 units per order. If you took advantage of this price break, how much would you save annually? (Do not round any intermediate calculations (including number of setups per year). Round your final answer to 2 decimal places.)
Annual savings $
Provide complete and step by step solution for the question and show calculations and use formulas.