One of your most popular products has an annual demand of 4,000 units. The cost of each product is $90 and its inventory carrying cost is $9. Your average ordering cost is $25 per order. It takes about 5 working days for an order to arrive from the supplier and during this time the demand per week for the product is approximately 80.
a. What is the economic order quantity?
b. What is the average inventory if the economic order quantity is used?
c. What is the optimal number of orders per year?
d. What is the optimal number of days between any two orders assuming 250 working days per year?
e. What is the total annual inventory cost (product cost + carrying cost + ordering cost)?
f. What is the reorder point?