Jake, Inc. begins a review of ordering policies for its continuous review system by checking the current policies for a sample of its A items. Following are the characteristics of one item:
Demand (D) = 94 units/week (assume 52 weeks per year)
Ordering and setup cost (S) = $720/order
Holding cost (H) = $23/unit/year
Lead time (L) = 3 weeks
Standard deviation of weekly demand = 30 units
Cycle-service level = 82 percent
a. What is the EOQ for this item?
b. What is the desired safety stock?
c. What is the reorder point?
d. What are the cost implications if the current policy for this item is Q = 300 and ROP = 120?