Question: (a) What do we mean by the ABC inventory classification? (b) In a firms inventory management, it often treats a few items with the fixed-order

(a) What do we mean by the ABC inventory classification?

(b) In a firms inventory management, it often treats a few items with the fixed-order quantity inventory model, while many other items with a fixed-time period model. Explain the rationales of this practice from the perspective of inventory management.

(c) A manufacturer keeps a continuous inventory review system on the key component, part X. The annual demand on part X is 12,000 units and the demand rate is constant. The supplier charges $50 for each unit of part X. Each order costs $150 to process and annual holding cost per unit is 20% of the purchase price. What is the economic order quantity? How many orders will be placed each year (365 days)? If the lead time is 3 days, what is the reorder point?

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