Watersports, Inc., sells high-performance water skis. Because its sales are seasonal, Watersports calculates and uses different reorder points for summer and winter months. The following information is available:

The water skis cost $150 each, and Watersports sells them to its customers for $300. Watersports' supplier charges $500 for each order placed. Watersports incurs an annual carrying cost of $17 per set of skis. Watersports has noticed in the past that sometimes the deliveries can be up to two days later than average and that the customer demand can be as much as 1,800 skis during April through October and 500 skis during the rest of the year.
Required:
1. Calculate the appropriate economic order quantities for the two seasons.
2. Calculate the safety stock for the two seasons that is necessary to accommodate potential delays in inventory deliveries and potential spikes in sales demand.
3. Calculate the reorder point (with safety stock) for the two seasons.
4. Interpretive Question: Describe the value and the cost of having safetystock.

Transcribed Image Text:

April-October November-March Lead time (days). Total customer demand for the period 3 1,600 400