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    Calculating EOQ, safety stock and inventory costs

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    Given the following information, determine an inventory management system for an item in demand 50 weeks/year.
    Item Cost $10
    Order Cost $250
    Annual Holding Cost $3.33/unit
    Annual Demand 25,750
    Weekly demand 515
    Std Dev of Demand 25/week
    Lead Time 1 week
    Std Dev of Lead Time 0.1 week
    Service Level 95%

    a. State the order quantity and re-order point
    b. Determine the annual holding and order costs
    c. If a price break of $50/order was offered for orders over 2000 units, should you plan on 2000 unit orders?

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    Solution Summary

    Solution depicts the methodology to find EOQ, safety stock and inventory costs in the given case.