Given the following information, formulate an inventory management system The it

Question

Given the following information, formulate an inventory management system The item is demanded 50 weeks a year Standard deviation of weekly per week 1 week Item cost Order cost Annual holding cost (%) Annual demand Average demand 7.00 $243.00 demand 20 Lead time Service probability 32% of item cost 95% 22,100 442 per week a. Determine the order quantity and reorder point. (Use Excel's NORMSINV) function to find your z value and then round that z-value to 2 decimal places. Do not round any other intermediate calculations. Round your final answers to the nearest whole number.) Optimal order quantity Reorder point 2190 units units b. Determine the annual holding and order costs. (Do not round any intermediate calculations. Round your final answers to 2 decimal places.) Holding cost Ordering cost 2453 2452 c. Assume a price break of $50 per order was offered for purchase quantities of 2.200 units per order. If you took advantage of this price break, how much would you save annually? (Do not round any intermediate calculations (including number of setups per year). Round your final answer to 2 decimal places.) Annual savings

Explanation / Answer

reorder point= (daily usage* lead time)+ safety stock

in the given problem the daily usage is= 442 units and lead time is 1 week, hence the reorder point is 442+20 units

the reorder point is= 462 uints

the present order quantity is 2190 units, and the number of orders are= 22100/2190= 10.09 orders

with new proposal, the number of units per order is 2200, the number of orders= 10.04,

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