Consider the inventory of disposable food trays at a hospital, which are ordered once a month. The demand for these trays, which cost the hospital $0.75 apiece, is forecasted to be 25,000 units per month (with a CV of 10%). The annual holding cost rate used at the hospital is 20% and the ordering cost is estimated to be $25. The lead time from order to receipt is 1 month. The desired service level is 95%.
a. Calculate the order up to level (OUL).
b. Calculate the order quantity if there are 22,456 food trays in inventory and another 25,407 in transit.