Problem 11-15 (Algo)

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

Item cost	$	12.00		Standard deviation of weekly demand	20	units
Order cost	$	250.00	/order	Lead time	1	week
Annual holding cost (%)		20	% of item cost	Service probability	90	%
Annual demand		22,700	units
Average demand		454	/week

a. Determine the order quantity and reorder point. (Use Excels NORMSINV( ) function to find your z-value and then round that z-value to 2 decimal places. Do not round any other intermediate calculations. Round your final answers to the nearest whole number.)

Optimal order quantity	2,175	units
Reorder point	480	units

b. Determine the annual holding and order costs. (Do not round any intermediate calculations. Round your final answers to 2 decimal places.)

Holding cost	$2,610.59
Ordering cost	$2,609.60

c. Assume a price break of $50 per order was offered for purchase quantities of 2,200 units per order. If you took advantage of this price break, how much would you save annually? (Do not round any intermediate calculations (including number of setups per year). Round your final answer to 2 decimal places.)

( MISSING THIS ONE )