An inventory management problem: We regularly purchase an item that has the following supply information:

• Cost to make a purchase $50
• Cost to hold $25 per year
• Cost for each item $24
• Demand is 2,500 per year, generally spread throughout the year
• Lead time 112 days

a. What is the EOQ and the reorder point?

b. Price breaks: 10% discount if purchasing more than 300 units at a time. How does the EOQ and reorder point change?

c. What if the buyer negotiated the price break to be at 50 units rather than 300

d. If the demand varies with a Standard Deviation of 5% and we wish to be 99% sure of no stock out, what should we use as a safety stock in our ordering the supply

Answer parts a-d for question 1