Question: 3. (30 points) Economic Order Quantity & Reorder Point. The annual demand for an item is 4000 units per year. It costs 20 to place

3. (30 points) Economic Order Quantity & Reorder Point. The annual demand for an item is 4000 units per year. It costs 20 to place an order and 100 per year to store an item in inventory. Assume that the company operates 365 days per year.

a. (3 points) What is the Economic Order Quantity? b. (3 points) How many orders are placed per year? c. (3 points) How long is the time between placing orders? d. (3 points) How much is the annual ordering cost? e. (3 points) What is the minimum inventory held? f. (3 points) What is the maximum inventory held? g. (3 points) What is the average inventory held? h. (3 points) How much is the annual inventory holding cost?

Now assume lead time is 2 days. Standard deviation of (normally distributed) demand over lead-time is 15. Required availability is 95%.

(3 points) How much safety stock is needed?
(3 points) What should the reorder point be?

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