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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:

  1. Determine the optimal level of inventory to order per the EOQ model.
  2. How many orders per year will Sperry have using the EOQ quantity.
  3. What is the reorder point for Sperry? (
  4. What is the level of safety stock that will minimize carrying and stockout costs.

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