Your company manufactures and sells canvas knapsacks. Each knapsack has plastic clips which are used to close the various compartments. Your forecasts indicate that you expect to use 118,500 clips next year. Your company works 250 working days per year. You have been asked to design an inventory control system for clips. Each clip costs $1.25 from your supplier, and keeping the clips in inventory for one year costs 45% of the clip's value. Each order that you place costs $85 of administrative time. You must wait 3 days after placing an order for the clips to arrive from your supplier in British Columbia.

a) How many clips should you order at a time from your supplier?

b) Explain how you will know when it is time to place an order for clips.

c) How much will it cost you per year in holding costs for clips?

d) How much will it cost you per year in ordering costs for clips?

e) How many orders per year will you place for clips?

f) What is your average inventory level for clips?

g) Suppose your business is currently ordering 10,000 of these clips at a time. How much is your company currently spending on holding costs and ordering costs using an order size of 10,000 units at a time? How much would be saved by switching to the EOQ?

h) What will the new ROP be if the company decides to implement a safety stock policy of 2 days worth?

i) How much ADDITIONAL holding costs will the company incur due to having this safety stock policy?