A building materials supplier has an annual demand for 400,000 linear feet of softwood stock (2" x 4" - 4" x 12", etc), which costs an average of $1.61 per linear foot. Assume the ordering cost is $120.00 and the annual carrying cost is 24%.
a. Compute the EOQ.
b. How many orders are placed each year and what is the order interval?
c. What are the carrying and ordering cost?
d. What is the total annual cost of maintaining inventory?
e. If safety stock of 95% (z = 1.65) is desired, order lead time is 3 days, and the standard deviation of demand during lead time is 1,000 board feet, what is the safety stock?
f. If the company has its own sawmill to process the stock, (annual capacity = 800,000 board feet) calculate the ELS.