Alexis Company uses 800 units of a product per year on a continuous basis. The product has a fixed cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock.
a. Calculate the EOQ.
b. Determine the average level of inventory. (Note: Use a 365-year to calculate daily usage.)