Arizona Instruments uses integrated circuits (ICs) in its business calculators. Its annual demand for ICs is 120,000 units. The ICs cost Arizona Instruments $10 each. The company has determined that the EOQ is 20,000 units.
It takes 18 days between when an order is placed and when the delivery is received. Carrying costs are 20 percent of the inventory value. Determine the following:
a. The optimal ordering frequency
b. The average inventory and annual carrying costs
c. The reorder point.