TelevCo is a store that sells television sets and other television-related products. A new television set costs $550 per unit. TelevCo’s annual holding cost rate is 24%. Ordering costs are estimated to be $70 per order. Demand for the television set is expected to be constant with a rate of 40 units per month. Assume there are 250 working days per year.
a) What is the recommended order quantity for the television set?
b) What are the estimated annual purchasing cost, inventory holding cost and ordering costs associated with this product?
c) If the lead time for an order is 5 days, what is the reorder point?
d) How many orders will be placed per year? What is the cycle time?
e) Plot an Inventory Level vs. Time graph for Televco based on your findings.