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INVENTORY MANAGEMENT: Compute for the Optimum Order Size, Reorder point, safety stock in units and total cost

You are the newly hired Operations Management Group in charge of inventory control of Anton's Appliances. Anton's Appliances is one of the distributors in the Philippines of an imported electronic item. The company orders the item directly from the US. There are no local distributors. You need to design and implement the Inventory Policy of the Company (how much to order and when to order). A quantity discount is available. Will you avail of the discount? Why or why not? The annual demand for the product is uncertain. The past 5 year history is as follows: 1994 - 4320 units, 1995 2880, 1996 - 3600, 1997 - 2160, 1998 - 5040 The selling price of the product is P4,000. The average demand over lead time is 300 units while the standard deviation of the demand over lead time is 60 units. The cost of making an order is P300.00. The cost of carrying a unit of the product is P30.00. The total all-in-cost (that is cost of the product paid to the supplier plus other direct/variable costs) is P3,600. The foregone contribution margin is therefore P400. Beginning inventory available is 300 units. Supplier needs 30 days to deliver the order. Price of product: P3,000. Quantity Discount available: Discount of P150/unit for orders of 1000 or more