Question: Problem 11-15 (Algo) Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. PARAMETER VALUE PARAMETER VALUE Item

Problem 11-15 (Algo)

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

PARAMETER	VALUE			PARAMETER	VALUE
Item cost	$	11.00		Standard deviation of weekly demand	30	per week
Order cost	$	277.00		Lead time	1	week
Annual holding cost		32	% of item cost	Service probability	90	%
Annual demand		26,900
Average weekly demand		538	per week

a. Determine the order quantity and reorder point. (Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places and final answer to the nearest whole number.)

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

c. Assume a price break of $55 per order was offered for purchase quantities of 2,000 or more units per order. If you took advantage of this price break, how much would you save annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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