Osprey Sports stocks everything that a musky fisherman could want in the Great North Woods. A particular musky lure has been very popular with local fishermen as well as those who buy lures on the Internet from Osprey Sports. The cost to place orders with the supplier is 530/order; the demand averages 4 lures per day. with a standard deviation of I lure; and the inventory holding cost is $1.00/lure/year. The lead time form the supplier is 10 days, with a standard deviation of 3 days. It is important to maintain a 97 percent cycle-service level to properly balance service with inventory holding costs. Osprey Sports is open 350 days a year to allow the owners the opportunity to fish for muskies during the prime season. The owners want to use a continuous review inventory system for this item.
a What order quantity should be used?
b. What reorder point should be used?
c. What is the total annual cost for this inventory system?