A plant orders Chemical X that is used at a rate of 800 barrels per year. Each order placed with the supplier costs $45 to process and the annual cost to hold inventory is $80 per barrel. Delivery lead time of the barrels averages 6 days and the plant manager set a safety stock level of 16 barrels.
a) What is the economic order quantity?
b) What is the total holding cost for the year?
c) What is the total ordering cost for the year?
d) How many orders will be placed each year?
e) The next order should be placed when inventory drops to what amount? (assume 365 days in one year for converting annual demand to daily demand)