2) The annual demand for red large summer shorts, for Heidis Fashions, Inc. is 25,000 units. The cost of placing an order is $80, and the cost of carrying one unit in inventory for one year is $25.

Required: (5)

(a) Use the economic order quantity model to determine the optimal order size.

(b) Determine the reorder point assuming a lead time of 10 days, and a work year of 250 days.

(c) Explain the use of safety stocks by a corporation