1. Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish. Ray has estimated the annual demand for this model at 1,000 units. His cost to carry one unit is $100 per year per unit, and he has estimated that each order costs $25 to place. Using the EOQ model, how many should Ray order? Please provide the formula, at least one step of calculation, and the correct order size.
2. Given the following information, formulate a continuous-review inventory management system. The item is demanded 50 weeks a year.
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Item cost
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$10
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Standard deviation of weekly demand
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Order cost
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$250
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25 per week
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Annual holding cost (%)
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33% of item cost
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Lead time
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1 week
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Annual demand
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25,750
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Service probability
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95%
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Average demand
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515 per week
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Compute the order quantity and reorder point.