Essay
Peterson Enterprises uses a fixed-order quantity inventory control system. The firm operates 50 weeks per year and has the following characteristics for an item:
Demand = 50,000 units/year
Ordering cost = $35/order
Holding cost = $2/unit/year
Lead time = 3 weeks
Standard deviation in weekly demand = 125 units
a.What is the economic order quantity (EOQ) for this item?
b.If Peterson wishes to provide a 90 percent cycle service level, what is the reorder point with safety stock?
Correct Answer:
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a.Q* = Sq. root of [2(50,000)(35)/2] = 1...View Answer
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