Question

A popular item stocked by the Fair Deal Department Store has an annual demand of 600 units. The cost to purchase these units from the supplier is $ 20 per unit and $ 12 to prepare the purchase order. The annual inventory holding cost is 20 percent of the purchase cost. The manager tries to maintain the probability of stockout at 5 percent or less. Lead time demand is uniform, between 30 and 70 ( i. e., the probability of lead time is 1/ 41 =.0244 for demand = 30, 31, . . . , 70).
a. Calculate the EOQ.
b. Calculate the reorder point.
c. Calculate the safety stock.
d. If we purchase 80 units or more, the unit purchase cost is reduced to $ 19. Calculate the EOQ for this quantity discount case.


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  • CreatedAugust 22, 2015
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