Question: Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. Item cost $10.00, order cost $250.00, Annual holding

Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. Item cost $10.00, order cost $250.00, Annual holding cost rate 33%, Annual demand 25750 units, average weekly demand 515 units, standard deviation of weekly demand 25 units, lead time 1 week.

  1. Calculate the order quantity, safety stock and reorder point if the manager wants to have only an average of 2000 units of shortage per year. What is the service level of this policy?
  2. Calculate the order quantity, safety stock and reorder point if the manager wants to have only an average of 1 order cycle with any units of shortage per year. What is the service level of this policy?

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