Problem: Given the following information, determine an inventory management system for an item in demand 50 weeks/year.
Item Cost $10
Order Cost $250
Annual Holding Cost $3.33/unit
Annual Demand 25,750
Weekly demand 515
Std Dev of Demand 25/week
Lead Time 1 week
Std Dev of Lead Time 0.1 week
Service Level 95%
1) State the order quantity and re-order point
2) Determine the annual holding and order costs
3) If a price break of $50/order was offered for orders over 2000 units, should you plan on 2000 unit orders?