InstaCam sells 1200 cameras per year, and the demand pattern throughout the year is very steady. The

store orders its cameras from a regional supplier at a cost of $250 each. Each time an order is placed, an

ordering cost of $125 is incurred. Holding costs are about 8.33% of the cost of the item annually.

Currently, InstaCam orders cameras every quarter - i.e, in quantities of 300 units.

a.

For the current ordering policy

(10 pts)

1. What is the average inventory held? (2 pts)

2. What is the number of orders placed annually? (4 pts)

3. What is the total annual cost of holding and ordering? (4 pts)

b. What is the economic ordering quantity - that minimizes the sum of holding and ordering costs?

(5 pts)

c.

For the EOQ

(12 pts)

1. What is the average inventory held? (2 pts)

2. What is the number of orders placed annually? (4 pts)

3. What is the number of days between orders? Assume InstaCam works 300 days a year.

(2 pts)

4. What is the total annual cost of holding and ordering? (2 pts)

5. How much does InstaCam save by switching from the current order quantity to the

EOQ? (2 pts)

d. Suppose the supplier has a lead time of 5 days. What reorder level should InstaCam use?

(3 pts)

e. If InstaCam places an order of at least 150 cameras each time it orders, the supplier will reduce

the price of each camera by $5. Should InstaCam use an order quantity of 150 units in order to

get this discount? Calculate all costs and savings and make a recommendation.

(10 pts)