ELLA T., Inc. has annual sales of 5,000 units; management decides to establish the EOQ model. The firm has two possible suppliers:
Supplier A Shipping costs $1,000
Per-unit carrying costs $74
Supplier B Shipping costs $800
Per-unit carrying costs $80
a. What is the EOQ for each supplier?
b. If the firm establishes a safety stock of 100 units, what is the firm’s average inventory for both suppliers?
c. What will be the firm's expected maximum and minimum inventory with each supplier?
d. If delivery takes eight days, what should be the firm's level of inventory when it places an order with supplier A?