Problem
Universal Services Inc. stocks a certain adapter at its central warehouse for supplying field service offices. The yearly demand for this adapter is 15,000 units. The company estimates its holding cost for this item to be $20 per unit per year. The cost to place and process an order from the supplier is $15. The company operates 260 days per year, and the lead time to receive an order from the supplier is 2 working days. The company wants to use the economic order quantity (EOQ) inventory management approach.
1. Find the economic order quantity (EOQ).
2. Find the annual holding cost.
3. Find the annual ordering (setup) cost.
4. What is the average inventory level?
5. How many orders would be expected in a year?
6. What is the expected time between orders?
7. What is the reorder point (level)?