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Inventory Management & EOQ Watersports purchases 18,200 oars per year (350 per week) at a cost of $65 per unit. They require a 10% annual
Inventory Management & EOQ Watersports purchases 18,200 oars per year (350 per week) at a cost of $65 per unit. They require a 10% annual rate of return on investment and incur other carrying costs of $4 per unit per year. Their relevant ordering cost is $120 per order and order lead time is one week. If there is a stockout, the additional cost to fulfill an order is $9/unit.
Demand probability is reflected in the table below:
Probability | Demand per week |
|
0.2 | 300 |
|
0.5 | 350 |
|
0.2 | 400 |
|
0.1 | 450 |
|
Required:
- Determine the optimal level of inventory to order per the EOQ model.
- How many orders per year will Sperry have using the EOQ quantity.
- What is the reorder point for Sperry? (
- What is the level of safety stock that will minimize carrying and stockout costs.
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