A company begins a review of ordering policies for its continuous review system by checking the current policies for a sample of SKUs. Following are the characteristics of one item.
Annual Demand (D) = 64 units/week (Assume 52 weeks per year)
Ordering and setup cost (S) = $50/order
Holding cost (H)= $13/ unit/year
Lead time (L) = 2 weeks
Standard deviation of weekly demand (Sigma t) = 12 units
Cycle-service level = 88 percent
a. What is the EOQ for this item?
b. What is the average demand during lead time (Xbar L)?
c. What is the desired safety stock (SS)?
d. What is the reorder point (R)?
e. What is the ordering cost at the lot size of EOQ?
f. What is the holding cost at the lot size of EOQ?
g. What the safety stock cost?
What is the total cost?