A wholesaler encounters a constant demand of 200 cases of one brand and box size of soap flakes per week from his retail accounts. He obtains the soap flakes from the manufacturer at $10 per case after paying the transportation costs. The average cost of each order placed is $5, and he computes his inventory carrying charges as 20 percent of the average inventory value on hand over a 1-year period.
a. Compute the EOQ for this product.
b. Assuming a constant lead time of 5 days for this product, what is the minimum reorder point that will allow the wholesaler to provide 100 percent customer service? Assume 5 operating days per week.
c. Determine the wholesaler's total cost per year for this product.
d. The manufacturer offers the wholesaler a quantity discount of $1 per case for purchasing in quantities of 400 cases or more. Should the wholesaler take advantage of this quantity discount?