Q. Jack's Pet Supplies operates 50 weeks per year also 7 days per week. It carries a particular brand of dog food which it manages using a continuous review inventory system. It purchases the dog food for $7.50 per bag which sells an average of 40 bags per week with a standard deviation of 6 bags per week. It costs $75 to place an order also the inventory carrying cost is 20% of the cost of the item. The lead time for a replenishment order is 2 weeks (14 days) also the desired service level is 98%. The present inventory on-hand is 300 bags with no backorders also no scheduled receipts.

a. Elucidate what order quantity should Jack use for this dog food?

b. Elucidate what reorder point should Jack use for this dog food?

c. Should Jack place a replenishment order today?

d. Compute the average annual cost of this inventory control policy.