ABC Bookshop uses a continuous review system for managing its inventory. As the new store manager, your responsibility is to ensure that the order quantities for the stationary items are correctly established. The characteristics of one of the stationary items are as follows:

Required:

Examine the inventory situation at ABC Bookshop for the above item by calculating the following:

i) Economic order quantity

ii) Total annual cost

iii) Reorder point including the safety stock

Demand = 45 units/day (Assume 365 days per year, and 7 days per week) Lead time (L) = 4 weeks Standard deviation of weekly demand = 110 units Unit cost (C)= $42 Holding cost (H) = 20 percent of the item unit cost per year Ordering cost (S) = $23/order Desired service level = 95% (== 1.64)