Problem:
Optimal Order Quantity, Reorder Point
The Super Discount store (open 24 hours a day, every day) sells 8-packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $.50 per pack. The cost to place an order for more is $20 and it takes four days for an order to arrive.
Find the optimal order quantity.
What is the reorder point?
How often should an order be placed?