Question: Demand for this product is normally distributed with a mean of 2000 per week Standard deviation of 400 per week Annual holding cost is 25%

Demand for this product is normally distributed with a mean of 2000 per week

Standard deviation of 400 per week

Annual holding cost is 25%

The cost of the product is 40 euro per unit; it sold at 46 euro

Each order incurs an ordering cost of 300 euro (fixed cost of transportation)

The company offer a service level of 95%

You may assume that a year consists of 50 working weeks

Please solve the following questions with step by step calculation

  1. Optimal order quantity
  2. Safety stock
  3. Reorder point
  4. Average inventory
  5. Annual inventory carrying cost
  6. Annual cost of placing orders

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