a) Calculate the item's EOQ.

b) Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item.

c) Which system requires more safety stock and by how much? Look at the obtained results for the safety stock of each option and find the difference.

Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = 13,000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $4.00/unit/year Lead time (L) = 8 weeks Cycle-service level = | = 96% Demand is normally distributed, with a standard deviation of weekly demand of 69 units