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Optimal Order Quantity, Reorder Point

The Super Discount store (open 24 hours a day, every day) sells 8-packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $.50 per pack. The cost to place an order for more is $20 and it takes four days for an order to arrive.

Find the optimal order quantity.
What is the reorder point?
How often should an order be placed?

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Solution Summary

This solution provides process of identifying optimal order quantity, reorder point and how frequently order should be placed given demand, annual carrying cost, ordering cost and lead time