Question: Peterson Enterprises uses a fixed order quantity inventory control system. The firm operates 50 weeks per year and has the following characteristics for an item:

Peterson Enterprises uses a fixed order quantity inventory control system. The firm operates 50 weeks per year and has the following characteristics for an item:

Demand = 50,000 units/year

Ordering cost = $35/order

Inventory-carrying cost as a percent of item value = 25%

Item (Unit) value = $8

Lead time = 3 weeks

Standard deviation in weekly demand = 125 units

If Peterson wishes to provide a 97 percent cycle service level, what is the reorder point?

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