If the annual holding cost is 30 percent of the cost and, Ask an Expert

Management Studies

A manager must set up an inventory ordering system for newly developed production item, P34, which can be ordered at a cost of $15 per unit and at any time with a lead time of two weeks and acceptable stockout risk of 2.5 percent. The company operates 50 weeks a year, and the weekly usage rate is normally distributed with an average of 60 units, and a standard deviation of 4 units per week. If the annual holding cost is 30 percent of the cost, and the cost of placing an order is $70,

a) What is the order quantity?
b) When should the manager reorder?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M983538

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