Question: Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. PARAMETER VALUE Item cost $12.00 Order cost $250.00

Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year.

PARAMETER	VALUE
Item cost	$12.00
Order cost	$250.00	per order
Annual holding cost	20	% of item cost
Annual demand	22,700	units
Average weekly demand	454	per week
Standard deviation of weekly demand	20	units
Lead time	1	week
Service probability	90	%

a. Determine the order quantity and reorder point.

Note: Use Excels NORMSINV( ) function to find your z-value and then round that z-value to 2 decimal places. Do not round any other intermediate calculations. Round your final answers to the nearest whole number.

Optimal order quantity =

Reorder point =

b. Determine the annual holding and order costs.

Note: Do not round any intermediate calculations. Round your final answers to 2 decimal places.

Holding cost =

Ordering cost =

c. Assume a price break of $50 per order was offered for purchase quantities of 2,200 units per order. If you took advantage of this price break, how much would you save annually?

Note: Do not round any intermediate calculations (including number of setups per year). Round your final answer to 2 decimal places.

Annual savings =

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