The beginning inventory of Nan Corporation consisted of 860 machines. This company maintains an inventory that never exceeds 940 units and, assuming normal lead time and usage, averages about 740 units. Normally the company uses 180 units during the usual lead time of 3 weeks.

When usage reaches the maximum of 80 units per week, management orders the economic order quantity at a time when inventory is at the level of 720 machines. 2569 Required:

a Assuming that management maintains a safety stock adequate enough to safeguard against maximum usage and maximum lead time, calculate the following:

1 The usage to order point 2 The amount of safety stock 3 The EOQ received 4 The normal usage rate 5 The estimated maximum lead time 6 The usage variance b Draw a graph showing the effects of safety stock.