The annual demand for a popular drug is 10,000 bottles. The purchase price of this drug (from the manufacturer) is $55. The retailer incurs $20 every time he places an order. It will cost annually a 8% of the purchase price to carry the inventory. Assume 48 weeks per year. Lead time is 2 weeks. Each order is received from the manufacturer in a single delivery.
a. How much should the store order at one time?
b. How many times per year should the store order?
c. How many weeks should be between two consecutive orders?
. d What is the store's minimum total annual cost of placing orders & carrying inventory?
e. What is the reorder point if the company wishes to carry no safety stock?
f. What is the reorder point if the company wishes to carry a safety stock of 13 bottles?