A stockroom manager must set up inventory ordering procedures for two new items, P34 and P35. P34 can be ordered at any time, but P35 can be ordered only once every four weeks. The company operates 50 weeks a year, and the weekly usage rate for each item is Normally distributed. The manager has gathered the following information about the items:

a. At what inventory level should the manager reorder P34?

b. Calculate the economic order quantity for P34.

c. Calculate the order quantity for P35 if 110 units are on hand at the time the order is placed.

Transcribed Image Text:

Item P34 Item P35 Average weekly 60 units 70 units demand Standard deviation 4 units per week 5 units per week Unit cost $15 $20 Annual holding 30% 30% cost rate Ordering cost $70 $30 per order Lead time 2 weeks 2 weeks Acceptable 2.5% 2.5% stock-out risk