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 20 per week Order cost $ 248.00 Lead time 3 weeks Annual holding cost (%) 31 % of item cost Service probability 99 % Annual demand 23,500 Average demand 470 per week a. Determine the order quantity and reorder point. (Use Excel’s NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round “z” value to 2 decimal places and final answer to the nearest whole number.) Optimal order quantity units Reorder point units b. Determine the annual holding and order costs. (Round your answers to 2 decimal places.) Holding cost $ Ordering cost $ c. Assume a price break of $50 per order was offered for purchase quantities of 2,400 or more units per order. If you took advantage of this price break, how much would you save annually? (Round your answer to 2 decimal places.) Annual savings $
Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year.
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 | 20 | per week | |
| Order cost | $ | 248.00 | Lead time | 3 | weeks | |
| Annual holding cost (%) | 31 | % of item cost | Service probability | 99 | % | |
| Annual demand | 23,500 | |||||
| Average demand | 470 | per week |
a. Determine the order quantity and reorder point. (Use Excel’s NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round “z” value to 2 decimal places and final answer to the nearest whole number.)
| Optimal order quantity | units | |
| Reorder point | units |
b. Determine the annual holding and order costs. (Round your answers to 2 decimal places.)
| Holding cost | $ | |
| Ordering cost | $ |
c. Assume a price break of $50 per order was offered for purchase quantities of 2,400 or more units per order. If you took advantage of this price break, how much would you save annually? (Round your answer to 2 decimal places.)
| Annual savings | $ |
| Item cost | $ | 7.00 | Standard deviation of weekly demand | 20 | per week | |
| Order cost | $ | 248.00 | Lead time | 3 | weeks | |
| Annual holding cost (%) | 31 | % of item cost | Service probability | 99 | % | |
| Annual demand | 23,500 | |||||
| Average demand | 470 | per week |
a. Determine the order quantity and reorder point. (Use Excel’s NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round “z” value to 2 decimal places and final answer to the nearest whole number.)
| Optimal order quantity | units | |
| Reorder point | units |
b. Determine the annual holding and order costs. (Round your answers to 2 decimal places.)
| Holding cost | $ | |
| Ordering cost | $ |
c. Assume a price break of $50 per order was offered for purchase quantities of 2,400 or more units per order. If you took advantage of this price break, how much would you save annually? (Round your answer to 2 decimal places.)
| Annual savings | $ |
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