Question: The following company is using a fixed inventory system. One of their products has the following characteristics: Order cost $35/order Unit cost $15/unit Holding cost/unit/year

The following company is using a fixed inventory system. One of their products has the following characteristics:

Order cost $35/order

Unit cost $15/unit

Holding cost/unit/year is 20% of unit cost

Annual demand 1800

Lead time 2 weeks

1. What is the EOQ?

2. What is the total annual inventory cost?

3. If order size is 400 instead of EOQ, what will be the impact on total cost?

4. If demand is not constant and has a weekly standard deviation of 12 units, what is the reorder point for a service level of 90%? Assume 50 working weeks in one year.

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