The Superior Corporation purchases a critical component from one of its key suppliers. The operations manager wants to determine the economic order quantity, along with when to reorder, to ensure that the annual inventory cost is minimized. The component is highly popular with annual demand of 10,000 units per year. The cost of one such component is $125. Annual holding cost rate is 20% of the item's cost, and the ordering cost is $50. Assuming there are 365 days in a year, answer the following questions.
a) What is the economic order quantity?
b) What is the annual holding inventory cost?
c) What is the annual ordering inventory cost?
d) What is the total annual inventory cost?
e)for an order lead time of five days, what is the reorder point (ROP)?
f) What is the order cycle (time between orders)?