Problem:
Johnson corporation has the following information about a product that it carries in stock: Average demand= 40 units per day Average lead time= 15 days Item unit cost= $55 for orders of less than 400 units Item unit cost= $50 for orders of 400 units or more Ordering cost=$30 Inventory carrying cost= 20%... The business year is 300 and the standard deviation of demand= 2.5 units and the standard deviation of lead time=1.5days, with desired service level= 97.5%
Required:
Question 1) What's the annual total acquisition cost of ordering at the price of $55 and $50?...
Question 2) What level of safety stock should Johnson maintain for the item?
Question 3) If Johnson chooses the ordering policy that results in the lowest total annual acquisition cost , and maintains the safety stock level for 97.5 percent service, what will Johnson's average inventory be for this item?
Question 4) What will the annual inventory turnover rate be for this item?
Question 5) What will the reorder point be for this item?
Solve the given numerical problem and illustrate step by step calculation