Question: Problem 1 (10 points) A firm is operating a fixed inventory system. One product has the following characteristics: Order cost $35/order Unit cost $15/unit Holding

Problem 1 (10 points) A firm is operating a fixed

Problem 1 (10 points) A firm is operating a fixed inventory system. One product has the following characteristics: Order cost $35/order Unit cost $15/unit Holding cost/unit/year 20% of unit cost Annual demand 1800 Lead time 2 weeks Answer the following questions: a. What is the optimal order quantity, EOQ? b. What is the total annual inventory cost? c If management decides to use order size of 400 rather than the EOQ, what will be the impact on total cost? (Calculate) d. If demand is not constant and it has a weekly standard deviation of 12 units, what is the reorder point for a service level of 95%? Assume that there are 50 working weeks in one year. (You can find copy of the Z table in your book, page 599.)

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