Assignment:
A regional warehouse purchases hand tools from various suppliers and then distributes them on demand to retailers in the region. The warehouse operates five days per week, 52 weeks per year. Only when it is open can orders be received. The following data are estimated for hand drills: Average daily demand = 100 drills; Standard deviation of demand = 30 drills; Lead time = 3 days; Holding Cost = $ 9.40/unit/year; Ordering Cost = $ 35/order; Service level = 95 percent.
(i) What is the order quantity (EOQ)?
(ii) What is the reorder point (ROP)?
(iii) What is the safety stock?