Problem 1:

A company decides to establish an EOQ for an item. The annual demand is 200,000 units. The ordering costs are $40 per order, and inventory-carrying costs are $2 per unit per year. Calculate the following:

(a). The EOQ in units.

(b). Number of orders per year.

(c). Annual ordering cost, annual holding cost, and annual total cost

Problem 2:

Given this information:

• Expected demand during lead time = 400 units
• Standard deviation of lead time demand = 50 units

Assuming that lead time demand is distributed normally. The risk of stockout is 1 percent during lead time.

1. What amount of safety stock is appropriate?
2. Calculate ROP