1. Barbara Brown is the purchasing agent for Central Valve Company, which sells industrial valves and fluid-control devices. One of their most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90.00, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that Central Valve stocks, and she has concluded that the average ordering cost is $25.00 per order. Furthermore, it takes about 8 days for an order to arrive from the supplier. During this time, the demand per week for Central valves is approximately 80. (Hint: Holding cost = Inventory carrying cost x unit cost
2. What is the economic order quantity?
3. What is the reorder point? Develop an inventory policy with the reorder point.
4. What is the total annual inventory cost (carrying cost + ordering cost)
5. What is the optimal number of orders per year?
6. What is the optimal number of days between any two orders assuming there are 250 working days per year?