Knutson Products Inc. is involved in the production of airplane parts and has the following inventory, carrying and storage costs:
1. Orders must be placed in round lots of 100 units.
2. Annual unit usage is 350000? (Assume a? 50-week year in your calculations.)
3. The carrying cost is 10 percent of the purchase price.
4. The purchase price is ?$10 per unit.
5. The ordering cost is $500 per order.
6. The desired safety stock is 5000 units. ? (This does not include delivery-time stock.)
7. The delivery time is 4 week.
Given the foregoing information:
a. Determine the optimal EOQ level.
b. How many orders will be placed annually?
c. What is the inventory order point ? (That is, at what level of inventory should a new order be placed?)
d. What is the average inventory level?