Problem
Michigan State Figurine Inc. (MSF) sells crystal figurines to Spartan fans. MSF buys the figurines from a manufacturer for $31 per unit. They send orders electronically to the manufacturer, costing $56 per order and they experience an average lead time of six days for each order to arrive from the manufacturer. Their inventory carrying cost is 20 percent. The average daily demand for the figurines is two units per day. They are open for business 250 days a year. Answer the following questions:
1. How many units should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time.
2. How many orders will they place in a year?
3. What is the average inventory?
4. What is the annual ordering cost?
5. What is the annual inventory carrying cost?