Question: Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. Item cost $ 8.00 Standard deviation of weekly

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


Item cost	$	8.00		Standard deviation of weekly demand	20	per week
Order cost	$	223.00		Lead time	4	weeks
Annual holding cost (%)		28	% of item cost	Service probability	99	%
Annual demand		27,400
Average demand		548	per week

a. Determine the order quantity and reorder point. (Use Excel's NORMSINV() function to find the correct critical value for the given ?-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)


Optimal order quantity 2366		units
Reorder point		units

b. Determine the annual holding and order costs. (Round your answers to 2 decimal places.)


Holding cost	$2616.32
Ordering cost	$2615.67

c. Assume a price break of $55 per order was offered for purchase quantities of 2,200 or more units per order. If you took advantage of this price break, how much would you save annually? (Round your answer to 2 decimal places.)

Annual savings

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