A wholesale company is reviewing its inventory costs for a high volume item which has an annual demand of 72,000 units, with a per unit purchase price of $10. The ordering cost is estimated at $25, and the annual inventory carrying cost for the warehouse is computed at 30% of the price while the in-transit shipping factor is 13%. The in-transit shipping time is 14 days.
Forecasted average demand is 200 units per day, with a standard deviation of the forecast error of 20 units per day. The average order lead time is 16 days with a satndard deviation of order lead time of 3 days. A 98% customer service level is to be maintained. There are 360 days in a year.
What is the annual carrying cost for this product?
What is the annual ordering cost for this product?
What is the cost of holding safety stock for this product?
What is the annual in-transit carrying cost for this product?
What is the total annual cost of this product?