Question: Buckeye Novelty Shop uses a continuous-review system and operates 52 weeks per year. One of the best-selling items has the following characteristics: Demand (D) =

Buckeye Novelty Shop uses a continuous-review system and operates 52 weeks per year. One of the best-selling items has the following characteristics:
Demand (D) = 14,000 units/year
Ordering cost (S) = $320/order
Holding cost (H) = $4/unit/year
Lead time (L) = 3 weeks
Cycle-service level = 95%
Demand is normally distributed, with a standard deviation of weekly demand of 120 units. Current on-hand inventory is 1,308 units, with no scheduled receipts and no backorders.
a. Calculate the item's EOQ. What is the average time, in weeks, between orders?
b. Find the safety stock and reorder point that provides a 95-percent cycle-service level.
c. For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing orders?
d. A withdrawal of 95 units just occurred. Is it time to reorder? If so, how many should be ordered?

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