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Calculating the various inventory control parameters

1. The Fine Garments Company sells fashion clothing. The forecasted annual demand for their premium leather jacket is 2,000. The order-processing cost per order is $40, and the inventory holding cost is $35/item/year. How many leather jackets should they order in one shipment?

2. The Fine Garments Company wants to use a reorder point system. To allow for uncertainties in delivery and customer demand, it wishes to hold four weeks of demand as safety stock. What should its reorder point be if the delivery lead time is two weeks, based on the calculated order quantity?

3. Design a periodic inventory control system for the Fine Garments Company if it wishes to hold five weeks of demand as safety stock. If on a review the inventory of the premium leather jacket is 102, how many leather jackets should be ordered?

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1. The Fine Garments Company sells fashion clothing. The forecasted annual demand for their premium leather jacket is 2,000. The order-processing cost per order is $40, and the inventory holding cost is $35/item/year. How many leather jackets should they order in one shipment?

D =Total demand= 2000 units per year
S = ordering cost=$40 per order
H = holding costs=$35 per unit per year ...

Solution Summary

Solution depicts the steps to estimate EOQ, reorder point, safety stock, and order quantity in the given case.

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