EOQ, reorder point, and safety stockAlexis Company uses

926

units of a product per year on a continuous basis. The product has a fixed cost of

$40

per order, and its carrying cost is

$4

per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock

a.Calculate the EOQ.

b.Determine the average level of inventory.

(Note:

Use a 365-day year to calculate dailyusage.)

c.Determine the reorder

point.

d.Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity