Best Byte, a major online consumer electronics retailer with a central depot in Surrey, BC, purchases a steady-selling video-casting device calledChromescreenfrom the manufacturer at $40/unit. The weekly demand forChromescreenis steady at 60 units. The fixed ordering cost forChromescreenis $100 per order and the annual holding cost rate is 25% of the unit purchasing cost. Assume 52 weeks/year.

A. Currently,Best Byteis implementing an EOQ policy forChromsecreen.Determinetheorder quantity and the total annual inventory-related cost (TC).

Order quantity:

TC:

B. Suppose,Best Bytehas developed an IT system, which simplified its order fulfillment process and lowered its fixed ordering cost by 50%. Select the impact of this change on the following measures forChromescreen.No explanations needed.Assume other parameters remain the same.

EOQ:increasedecreaseno changes

Number of orders/yr:increasedecreaseno changes

Total inventory-related cost:increasedecreaseno changes

For parts C ~ E, refer to the following:Due to frequent technological developments in the industry, the demand forChromescreenis no longer deemed steady. Weekly demand forChromescreenexhibits variability with an average demand of 60 units/week and a standard deviation of 12 units/week.Best Bytewants to target a 94% service level forChromescreen. The shipment from the manufacturer arrives exactly one week after the order placement.

C. How much safety stock ofChromescreenshould be held at the central depot?

Safety stock:

D. When shouldBest Byteplace an order forChromescreen? (i.e., what is the reorder point?)

ROP:

E.If the ordering system is set up in such a way that an order is placed forChromescreenwhenever the inventory level reaches 70 units, what would be the implied service level forChromescreen?

Implied service level: